The Securities and Exchange Commission announced Wednesday a proposal to rescind Rule 14a-8 under the Securities Exchange Act of 1934. The proposal would eliminate SEC oversight of shareholder proposals in public companies’ proxy materials for vote by shareholders and would “leave determinations about the role of shareholder proposals to state law and company governing documents,” according to the SEC’s release.
“Many of the justifications for adopting the rule either have not been substantiated in practice or are less compelling today, and the rule has had unintended consequences, including the implication of federal preemption that may have discouraged states from developing their own laws governing shareholder proposals,” the SEC stated.
Additionally, the SEC proposed amendments to Rule 14a-4(c) in an effort to modernize the proxy solicitation process. These amendments, according to the SEC, would:
- Eliminate the requirement that companies deliver an annual report to security holders;
- Eliminate the delivery deadline when documents are incorporated into a proxy statement;
- Eliminate the requirement and the ability to submit notices of exempt solicitation; and
- Shorten the minimum broker search period to five business days from 20.
“The proposed rescission of Rule 14a-8 would, if adopted, eliminate the federal rule regulating inclusion of shareholder proposals in a company’s proxy materials for vote by the company’s shareholders,” said SEC chair Paul Atkins in a statement. “To be clear, the proposed rescission would not eliminate the concept of shareholder proposals and is not an attempt by the Commission to silence shareholders. Rather, it is a recognition that the Commission must act within its authority.”
Targeting Shareholder Voting
Atkins, in his statement, said of the proposal’s timing that, coming during a period “of increased competition among states for corporate domicile, there is no better time for the Commission to recognize the limits of its authority, relative to state law, for regulating shareholder proposals. Competition has always been the engine for innovation and progress in America. As part of states’ efforts to attract companies, the proposed rescission of Rule 14a-8 should, if adopted, provide states with both the legal clarity and the motivation to implement their own ideas for a sensible shareholder proposal framework.”
The SEC proposal comes as President Donald Trump has focused on changing the shareholder voting process, specifically by limiting the role of proxy advisory firms, most notably by a December 2025 executive order. Trump named the two largest proxy advisers, Institutional Shareholder Services Inc. and Glass, Lewis & Co. LLC, and said they “wield enormous influence over corporate governance matters, including shareholder proposals, board composition, and executive compensation, as well as capital markets and the value of Americans’ investments more generally, including 401(k)s, IRAs, and other retirement investment vehicles.”
Trump’s order directed the SEC chair to “consider revising or rescinding those rules, regulations, guidance, bulletins, and memoranda that are inconsistent with the purpose of this order”; to review proxy advisers’ work for violations of the anti-fraud provisions of federal securities laws; and to screen their work overall for other potential violations of federal law.
Institutional Shareholder Services is part of ISS STOXX, which owns CIO.
A report from law firm Akim Gump Strauss Hauer & Feld LLP noted that the recission of rule 14a-8 would remove the lowest-cost channel for placing proposals in front of shareholders, resulting in institutional investors having to develop more resource-intensive and less certain methods to distribute shareholder proposals.
Some companies have moved their official domicile to benefit from less stringent governance standards, including proxy rules. Space Exploration Technologies Corp.—SpaceX—was criticized by institutional investors for moving to Texas from Delaware in 2024, because corporate laws in Texas make it more difficult for investors to initiate shareholder proposals. SpaceX’s move came after a Delaware Court of Chancery ruling that ordered Tesla to rescind Elon Musk’s 2018 CEO pay package, worth about $56 billion in options.
Industry Reactions
The California Public Employees’ Retirement System was critical of the SEC’s proposal. James Scullary, a spokesman for the system that managed $637.1 billion in pension assets as of June 30, says the fund views Rule 14a-8 “as a critical component of company-shareholder engagement.”
“The SEC’s proposal to rescind the rule directly harms the fundamental rights of shareholders and limits our ability to engage constructively and advocate for policies that positively influence long-term share value,” Scullary says.”For decades, the federal proxy process has been a vital, standardized mechanism for investors to raise material risks and hold corporate boards accountable. Dismantling this framework doesn’t modernize our markets; it simply silences the actual owners of these companies. In addition, by abandoning a unified federal standard and kicking the shareholder proposal process down to a patchwork of 50 state laws and individual corporate bylaws, the SEC is introducing inefficiencies and potential legal issues into U.S. capital markets.”
Glenn Davis, executive director of the Council of Institutional Investors, responded to the SEC proposal, saying “Yes, shareholder proposals can be a source of embarrassment when they reveal a disconnect between shareholders’ and managers’ understandings of what matters to long-term performance; and sometimes trigger compromise before a vote takes place. That is a feature of strong capital markets, not a basis for a government agency to swat a fly with a sledgehammer.”
The Interfaith Center on Corporate Responsibility, in a statement, referred to the proposed rescinding of 14a-8 as an “all hands-on-deck” moment for investors, while also describing the move as an attack on the fundamental rights of shareholders and on decades of precedent that have facilitated engagement between investors and companies.
“Investors focused on safeguarding the long-term value of their holdings have benefited from the shareholder engagement process as a key instrument for constructive dialogue between shareholders and executives for over 50 years,” ICCR CEO Josh Zinner said in a statement. “These engagements have led to many commonplace improvements in corporate risk mitigation and governance policies now considered best practices in a wide range of industries.”
Proponents of the SEC proposal said the shareholder proposal process has been hijacked by investors with a political agenda—generally referring to institutional asset owners and funds that have made environmental, social and governance factors a major focus of their shareholder proposals.
“The SEC’s previous proxy rules allowed political activists to hijack the proxy system at the expense of everyday investors,” said Chris Iacovella, president and CEO of the American Securities Association. “ASA applauds Chairman Atkins for ending the use of SEC resources to referee political disputes and redirecting them toward the agency’s core mission of protecting investors from fraud.”
The U.S. Chamber of Commerce, a trade association, also welcomed the SEC proposal. Mike Flood, senior vice president of the chamber’s Center for Capital Markets Competitiveness, said, “For too long, special interests have exploited Rule 14a-8 to advance their own agendas at the expense of public companies and their shareholders. We commend the SEC for seeking a long-term solution to this problem and for its ongoing work to encourage more businesses to go public.”
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