In an October 9, 2025 speech, SEC Chairman Paul Atkins sent a clear signal that SEC Staff would grant broad No-Action Letter relief to Delaware companies looking to exclude shareholder proposals pursuant to Exchange Act Rule 14a-8.
Are Shareholder Proposals Dead?
Even though Chairman Atkins’s speech focuses on environmental and social shareholder proposals, the impact extends beyond those two topics and implies that broad relief may be granted for any shareholder proposal brought under Rule 14a-8. Chairman Atkins focused on the precatory, or non-binding, nature of shareholder proposals, noting that he believes Delaware law does not permit precatory proposals.
Under this theory, precatory proposals are not proper subjects for shareholder action, which would permit management to request and receive no-action relief under 14a-8(i). But the rub is that shareholder proposals governed by Rule 14a-8 are almost always non-binding, including governance and compensation-related shareholder proposals as well as environmental and social proposals.
How Significant is the Issue of Shareholder Proposals?
Receiving shareholder proposals is a significant amount of work for a company. It often triggers multiple levels of internal reviews, engaging external counsel, negotiations with proponents in an attempt to facilitate withdrawal, and a submission of a well-researched and crafted no-action letter request to the SEC. Failure to negotiate a withdrawal of a proposal or to receive no-action relief results in inclusion of the proposal in the company’s proxy statement with a response from management, as well as the solicitation and tabulation that occurs with every item to be voted on in the proxy. It may also result in shareholder engagement before and after the vote. If the proposal is supported by a majority of votes cast, there is an expectation by shareholders and proxy advisory firms that boards address the proposal or risk withhold votes or votes against directors the following year. Even proposals that receive significant, but not majority, support often merit the same engagement workstreams. The board, or a committee of the board, is often involved in post-engagement briefing and potentially earlier parts of the workstream. Every shareholder proposal involves a significant amount of work for a company.
Not every company receives significant numbers of shareholder proposals. S&P 500 companies received an average of 2.2 known proposals in 2025,[1] and the numbers drop significantly in the other indices. A minority of companies bear a significant brunt of shareholder proposals. 10% of all known proposals in the S&P 500 were received by only five companies.[2] One company was known to have received at least 16 proposals in the 2025 proxy season, which is not even a record.[3] Even for well-resourced companies, the workload for dealing with large numbers of shareholder proposals is high.
The risks related to shareholder proposals have grown in recent years. Companies have been caught in the middle of political and cultural movements that play out through shareholder proposals, with some companies receiving competing “progressive” and “conservative” proposals. Some public companies have advocated for raising the thresholds for the submission of shareholder proposals from the current requirements of holding $2,000 worth of stock for three years.
The SEC’s policy shift will be welcome news for many companies, particularly those for whom shareholder proposals are a significant lift and companies who feel shareholder proposals put them in the crosshairs of other stakeholders or drag them into the currents of political, cultural and social disputes that they otherwise work to avoid.
What Would This Policy Shift Mean for the Future of Governance?
There is a long and storied tradition of shareholder proposals shaping elements of modern corporate governance, including some practices that are now considered best-in-class. Significant support for shareholder proposals have triggered widespread adoption of provisions that are shareholder friendly, even for companies that did not receive shareholder proposals on the specific topic. Declassifying boards resulting in annual director votes, elimination of supermajority thresholds, the ability of shareholders to call special meetings or lowered thresholds for shareholders to call special meetings, independent board leadership and majority voting are topics where shareholder proposals have changed the landscape for shareholder rights.
However, an easy ability to exclude shareholder proposals is not necessarily a windfall for management teams or boards. Shareholders and other stakeholders are likely to shift their focus onto companies that ask for certain proposals to be excluded and come to view such exclusion requests as a sign of poor governance itself. Furthermore, the policy shift will not take attention away from areas where shareholders see opportunities to improve governance as there are other mechanisms for shareholders to express their views.
This is the beginning of a shift that will fundamentally alter the balance of power between shareholders and companies in both overt and subtle ways. In the short term, leverage shifts to companies, which have also benefitted by other recent SEC actions, including the Commission’s greenlight for mandatory arbitration in company organizational documents, the recent no-action letter to ExxonMobil on a directed retail voting program, and the February 2025 guidance on the 13D/G rules that saw many institutional investors take a significant step back from more prescriptive elements of their shareholder engagement and proxy voting policies, among other shifts. Taken together, this is an engineered tectonic shift in favor of management.
What’s the Catch? Sounds Like We Pumped the Brakes to Avoid a Crash?
Regulation alone cannot tamp down shareholder engagement, stakeholder interests, or attention on companies. There’s a balance that is being upended and if one subscribes to a “hydraulic” theory of shareholder mobilization and action, clamping down on engagement in one sphere will result in shareholders seeking other avenues of influence.
In many ways, shareholder proposals and investor votes on shareholder proposals were a pressure relief valve. By providing an avenue for shareholders to express particular views, it preserved support on other important votes for companies
While we have discussed fluctuations in trends of director elections, directors continue to be elected with support well exceeding 90%, on average. Glass Lewis cited the number of directors that failed to receive majority support in the Russell 3000 at 72 in the 2025 proxy season, an exceedingly small number compared to the number of directors elected overall. Without shareholder proposals as a valve, pressure will be directed to director elections, say-on-pay votes, management compensation proposals and other management proposals. Combined with the impact of the 13D/G rules, companies are less likely to hear about discontent from their shareholders, particularly the largest ones.
Shareholder activists, who have long leveraged stakeholder discontent in their campaigns, are likely to capitalize on an increase in stakeholder angst. For example, in 2024 the United Mine Workers of America, a labor union affiliated with the AFL-CIO, leveraged the lower-resource universal proxy card rules to run a “headless” proxy contest for five governance proposals. While the proposals were run as precatory, advisory, and non-binding, it would not take much more effort to run a binding-vote proxy contest using the same tools. While we did not see a repeat of this tactic in the 2025 proxy season, the SEC’s policy shift may push more proponents down this path in 2026 and the years that follow.
[1] See Freshfields’ Trends and Updates from the 2025 Proxy Season, (https://www.freshfields.com/globalassets/noindex/documents/trends-and-updates-from-the-2025-proxy-season-june-2025.pdf).
[2] Id.
[3] Id.
