Shareholder Proposal Shakeup: SEC Proposes Elimination of Federal Rule Requiring Public Companies to Include Shareholder Proposals in Proxy Materials
On September 16, the Securities and Exchange Commission (SEC) proposed the rescission of Rule 14a-8, the federal rule requiring public companies to include shareholder proposals in their proxy materials. If the rule is rescinded, determinations about the role of shareholder proposals would be left to individual state laws and company governing documents.
“For the last 80 years, the SEC has served as referee for shareholders who wish to bring concerns to a vote at shareholder meetings,” said Matthew Illian, Director of Responsible Investing at United Church Funds (UCF). “If this proposed is finalized, investors will face greater hurdles when seeking to put an issue to a shareholder vote.”
Illian points out that the proposed rule change doesn’t cancel the right to file shareholder resolutions. But it does shift oversight of the process from the SEC to the states where these companies are incorporated. Delaware will be particularly important, because over two-thirds of large public companies are incorporated there.
Illian explains, “In theory, every state could be impacted, because they have public companies incorporated there. But in reality, only a handful states, like New York, Texas and Washington, incorporate large public companies, where shareholders focus most of their attention. So, if the SEC finalizes this proposal, investors will need to pay much closer attention to state corporate law to understand what rights shareholders have to bring proposals forward.”
Rule 14a-8 remains in effect. The timing and impact of any final rescission, including its implications for the 2027 proxy season, remain uncertain and could be affected by legal challenges. In the meantime, the rescission process is subject to a 60-day public comment period. “UCF and many of our colleagues at the Interfaith Center on Corporate Responsibility (ICCCR) are preparing comments for the SEC,” said Illian. “We’ll also be watching developments in state corporate law closely as we evaluate how investors can continue exercising shareholder rights if the proposal is finalized.”
UCF remains committed to filing shareholder resolutions on behalf of the churches and faith-based organizations who invest with us. As the rules governing shareholder proposals evolve, UCF will continue exploring ways to use shareholder rights and other forms of engagement to advance values-aligned investing in the pursuit of a more just world.
Click here to watch a video where UCF’s Matthew Illian and Adam Sank discuss this topic.