In this two-part series, we explore recent developments in shareholder proposals and the potential future of such proposals. In Part 1, we explore recent developments in the SEC’s approach to such proposals. In the forthcoming Part 2, we will explore how the changes by the SEC’s approach to shareholder proposals raises certain state law issues.
For decades, Securities and Exchange Commission (“SEC”) Rule 14a-8 has operated in the background of proxy season, giving qualifying shareholders an avenue to include their proposals in a company’s proxy statement. Since early 2025, however, the rule has moved to the center of the SEC’s agenda, with new staff guidance, two significant changes to the no-action process, and a newly proposed rule that would rescind it entirely.
What Rule 14a-8 Is and Where It Came From
At its core, Rule 14a-8 requires a reporting company subject to the federal proxy rules to include a qualifying shareholder’s proposal in its proxy statement, and to identify that proposal in its form of proxy, subject to a set of eligibility, procedural, and substantive requirements. If a company believes a proposal fails one of those requirements, it has historically been able to seek “no-action” relief from the SEC’s Division of Corporation Finance (the “Division”). Regardless of whether it sought staff no-action relief, a company that intends to exclude a proposal must file its reasons with the SEC and simultaneously provide the proponent with a copy of the submission at least 80 calendar days before filing its definitive proxy materials.
Rule 14a-8 was designed to give qualifying shareholders meaningful access to the company’s proxy process without requiring them to bear the cost of a separate solicitation. As the SEC has explained, the rule “enables eligible shareholder-proponents to easily present their proposals to all other shareholders, and to have proxies solicited for their proposals, at little or no expense to themselves.” The concept traces back to the 1942 predecessor to the current version of the rule, adopted under Section 14(a) of the Securities Exchange Act of 1934, which reflected the principle that a proposal must be a “proper subject” for shareholder action.
The rule has been revisited occasionally over the decades. For instance, in 1998, the SEC recast Rule 14a-8 into a “plain-English” question-and-answer format, modified several of its interpretations, and increased the dollar-value eligibility threshold from $1,000 to $2,000, while retaining the alternative one-percent ownership test and one-year holding period, a framework that remained in place until 2020. In 2020, the SEC under then-Chairman Jay Clayton adopted a package of amendments that replaced the longstanding $2,000-or-one-percent ownership test with a tiered set of ownership thresholds, capped each person at one proposal per meeting, and raised the resubmission thresholds to five, 15, and 25 percent.
What Is Happening Now
Recent activity has centered on SEC staff guidance and the no-action process. In November 2021, the Division issued Staff Legal Bulletin No. 14L (“SLB 14L”), which reshaped the “ordinary business” exception in Rule 14a-8(i)(7), the provision that permits a company to exclude a proposal that “deals with a matter relating to the company’s ordinary business operations.” SLB 14L narrowed the availability of that exclusion for proposals raising significant policy issues by focusing on whether a proposal raised a policy issue with broad societal impact rather than on the issue’s nexus to the particular company.
In February 2025, the staff reversed course with Staff Legal Bulletin No. 14M (“SLB 14M”), which rescinded SLB 14L and restored a company-specific analysis under the “ordinary business” and “economic relevance” exclusions in Rule 14a-8. SLB 14M also reinstated portions of the pre-SLB 14L staff guidance addressing micromanagement. Under this approach, the broad social or ethical importance of an issue does not by itself determine whether a proposal may be excluded. Instead, the analysis focuses on the significance of the issue to the particular company.
In November 2025, the Division announced a significant change to the no-action process for the 2025–2026 proxy season: except for requests under Rule 14a-8(i)(1) (concerning proposals that are not proper subjects for shareholder action under applicable state law), the staff would no longer substantively evaluate companies’ exclusion arguments or issue individualized no-action views. Companies were still required to submit their Rule 14a-8(j) notices, but they could only obtain a staff no-objection letter by stating, without qualification, that they had a reasonable basis for exclusion under Rule 14a-8, existing SEC guidance, or judicial decisions. The staff would then issue the letter without evaluating the company’s legal position.
On August 14, 2026, the Division went further, announcing that it would stop responding to Rule 14a-8 no-action requests altogether. That change eliminated both the remaining exception for Rule 14a-8(i)(1) requests and the representation-based no-objection letters introduced the prior year, although compliance with the Rule 14a-8(j) notices is still required.
What Is Being Proposed
The SEC has signaled for some time that formal rulemaking is under consideration that could codify its recent practices. On August 28, 2026, the SEC submitted the rulemaking to the Office of Information and Regulatory Affairs within the Office of Management and Budget for review, captioned “Rescission of Rule 14a-8’s Federal Regulation of Shareholder Proposals and Amendments to Rule 14a-4.” Those steps led to the SEC’s September 16, 2026 proposing release, in which the SEC formally proposed to rescind Rule 14a-8.
The September 2026 proposal follows a December 2025 executive order directing the SEC to review, and to consider revising or rescinding, all rules, regulations, and guidance relating to shareholder proposals, including Rule 14a-8. Chairman Atkins has framed the review around the view that the SEC’s authority to regulate in the “public interest” is not unlimited, and that Rule 14a-8 may intrude on the state laws that govern the relationship between shareholders and the companies they own. Chairman Atkins stated, “We are duty bound to question whether a rule is a proper exercise of the [SEC]’s statutory authority and whether it continues to reflect sound policy.”
The proposing release explains that the SEC is proposing to rescind Rule 14a-8 because it exceeds the SEC’s statutory authority under Section 14(a) and intrudes into matters of state law, while also citing independent policy reasons for rescission (for example, that many of the rule’s original justifications have not been substantiated or are less compelling today, and that the rule has discouraged states from developing their own shareholder proposal frameworks). If adopted, rescission would leave determinations about shareholder proposals to state law and company governing documents.
The public comment period runs for 60 days after publication of the proposing release in the Federal Register.
The proposed rescission could reduce the number of shareholder proposals submitted for inclusion in issuer proxy materials, depending upon actual or perceived state law requirements or if investors fear lengthy court battles. However, the consequences for issuers may be more mixed than this suggests. Rescission would not be expected to eliminate shareholder proposals or shareholder activism; instead, activism may simply take a different form, leaving companies with less certainty about how best to respond. As Chairman Atkins stated, “To be clear, the proposed rescission would not eliminate the concept of shareholder proposals and is not an attempt by the [SEC] to silence shareholders. Rather, it is a recognition that the [SEC] must act within its authority.” For now, companies must continue to comply with Rule 14a-8(j), which still requires notifying the SEC and the proponent before excluding a proposal. For shareholders and investor advocates, the stakes are just as high. A coalition of investor groups has already petitioned the SEC to retain the rule, warning that outright rescission would upset a longstanding balance between investors and the companies they own.
What Companies and Boards Can Do Now
Even amid the uncertainty, boards are not without options. A sensible first step is to revisit advance notice bylaw provisions to confirm they are clear and concise, provide workable mechanics, and give the company adequate time to evaluate matters and make comprehensive disclosure. Well-drafted advance notice provisions can limit the ability of shareholders to raise business from the floor of the annual meeting without complying with the bylaws’ notice requirements, and provisions adopted on a “clear day,” well before any dispute, are more likely to be viewed favorably if they are later tested in litigation. Boards should also ask their advisors for regular updates on the evolving federal and state landscape, on trends in shareholder proposals, and on related litigation developments. For a closer look at how state law, including recent Texas legislation, could reshape the shareholder proposal landscape if the federal framework is no longer available, see Part 2 of this series. A company that receives a proposal should continue to evaluate it under the Rule 14a-8 parameters and build a record supporting its position.
Engagement with large shareholders is equally important. Meaningful communication on key governance, risk management, and business initiatives, while always being mindful of Regulation FD, helps build the trust that can translate into support on future annual meeting agenda items. Investor groups have warned that diminished federal oversight could increase company costs and litigation in the absence of an orderly process, which makes proactive engagement all the more valuable. Whatever the outcome of this rulemaking, the result will reshape a fixture of American proxy season that has stood for more than eighty years.
For timely insights and ongoing analysis, stay up to date on the proposed amendments by following Thompson Coburn LLP on LinkedIn and visiting our Public Company Reporting and Corporate Governance page.
