In a recent Law360 article, Thompson Coburn attorneys Michele Kloeppel, Sarah Larson, and Christian Witte examined the potential impact of the SEC’s proposed rescission of Rule 14a-8 and the role states may play in shaping the future of shareholder proposals.
The article explores how eliminating the SEC’s longstanding framework for shareholder proposals could shift governance questions to state legislatures and courts, creating a patchwork of requirements for public companies and shareholders. The authors note that while some companies may welcome relief from the current process, shareholder activism is unlikely to disappear.
“Shareholder activism may simply look different going forward, and companies would have less certainty on how best to address proposals outside the established federal framework,” they write. Activists could pursue alternative strategies, including binding bylaw amendments, director opposition campaigns, or litigation, while companies may face increased uncertainty and costs in responding to proposals.
The article also highlights how states could use the regulatory shift as an opportunity to attract public companies by adopting issuer-friendly shareholder proposal frameworks. At the same time, companies incorporated in states that do not establish clear rules may face greater uncertainty and increased vulnerability to activist campaigns.
The authors conclude that boards should begin preparing now by reviewing governance provisions, monitoring evolving state law developments, and engaging proactively with shareholders as the regulatory landscape continues to evolve.
Read the full article here (registration required).
