SEC Staff Clears the Way for Standing Proxies under Retail Shareholder Voting Program

THE BOTTOM LINE

• The SEC staff will not object to a retail shareholder voting program that allows retail shareholders to provide their company with a standing proxy to vote their shares at every shareholder meeting in line with the recommendations of the company’s board if the program is voluntary, available to all retail shareholders at no cost, allows participants to opt out and to override votes cast by the board for them, provides shareholders with annual reminders of their enrollment status and their opt-out and override rights, and is consistent with other features of the program proposed by Exxon Mobil Corporation (“Exxon”).
  • Notably, this staff position only applies as it relates to Rules 14a-4(d)(2) and 14a-4(d)(3) under the Securities Exchange Act of 1934 (the “Exchange Act”), which rules generally prohibit a proxy conferring authority to vote at more than one meeting.
• Since the granting of the no-action relief:
  • Two shareholder advocacy organizations have formally asked the SEC staff to reconsider and rescind the no-action relief, arguing that the program conflicts with SEC rules, including the plain language of Exchange Act Rules 14a‑4(d)(2) and 14a-4(d)(3), undermines the policy goals of the proxy rules, and sets a harmful precedent for retail shareholder voting rights; and
  • An Exxon shareholder has filed a class action suit against Exxon and its directors seeking an injunction enjoining the continued operation of the program and alleging breaches of the directors’ fiduciary duties, claiming that the program is an unlawful solicitation in violation of SEC rules that unlawfully impairs the voting rights of shareholders and seeks to entrench Exxon’s board and suppress shareholder dissent.
• While the program provides a blueprint for public companies that have large retail bases and are incorporated in states permitting standing proxies to consider, those companies should consider waiting for the resolution of the shareholder litigation before acting.

THE DETAILS

On September 15, 2025, the staff of the U.S. Securities and Exchange Commission (the “SEC”) granted no-action relief with respect to the compliance of Exxon’s proposed retail shareholder voting program (the “program”) with Exchange Act Rules 14a-4(d)(2) and 14a-4(d)(3).

The program, which is voluntary and at no cost to retail shareholders, would allow participants to provide Exxon with a standing voting instruction to vote their shares at each shareholder meeting in line with the voting recommendations of its board, thereby promoting voting by Exxon’s retail shareholders at shareholder meetings. According to Exxon’s letter requesting the relief, in addition to providing participants with the option to opt out from the program at any time, participants would also be able to override their standing voting instruction for a particular meeting by directly casting their votes using the proxy materials they receive, and Exxon would provide participants annual reminders of their enrollment status and these opt-out and override rights.

Given the on-going nature of the voting instruction, Exxon sought confirmation from the SEC staff that they would not recommend any SEC enforcement action on the basis that the program violates Exchange Act Rules 14a-4(d)(2) and 14a-4(d)(3), which generally prohibit a proxy conferring authority to vote at more than one meeting. While noting that a standing instruction is permitted under New Jersey law, the state corporate law applicable to Exxon, and under Delaware law, Exxon argued that “the choice made (in response to the annual reminder or the proxy materials) is . . . a reaffirmation or renewal of the standing voting instruction, which enables compliance with Rules 14a-4(d)(2) and 14a-4(d)(3).”Exxon also clarified that it was not seeking no-action relief regarding whether the program involves a “solicitation” of proxies, as defined under the SEC rules.

We discuss below the key features of the program and key developments since the granting of the no-action relief.

Key Features of the Program

• Who can participate: All retail shareholders (both registered owners and beneficial owners) are eligible to participate, at no cost; each retail shareholder will be offered the same opportunity to enroll in the program. Investment advisers registered under the Investment Advisers Act of 1940 exercising voting authority for clients are, however, excluded.
• Opt-in via standing voting instruction: Participation is voluntary. Retail shareholders must affirmatively opt in to the program. To opt in, retail shareholders must provide the company with either an unqualified or a limited standing instruction to vote their shares, on an ongoing basis, in accordance with the voting recommendations of the company’s board. While an unqualified standing instruction would apply to all matters coming to a vote; a limited standing instruction would apply to all matters except contested director elections or mergers, acquisitions, or divestitures requiring shareholder approval under applicable state law or stock exchange rules (“shareholder approval transactions”).
• Ability to opt out: Participants may opt out of the program at any time at no cost. A participant’s cancellation of its standing voting instruction will, however, only apply to meetings for which the company has not yet filed a definitive proxy statement (i.e., future meetings). This is because votes covered by a standing voting instruction will be cast by the company on the date it files a definitive proxy statement for an upcoming meeting.
• Ability to override vote:: Even though participants may only opt out of the program in relation to future meetings, they may at any time (and at no cost) override their standing instruction for a particular meeting by casting their vote on any proposal using the proxy materials.
• Continuous receipt of proxy materials: Even after opting in to the program, participants will continue to receive all the company’s proxy materials for each meeting and their ability to vote directly will not be limited or restricted.
• Annual reminders:
  • Participants will receive annual reminders of their enrollment status, their ability to opt out of the program with respect to future meetings, and their ability to override their standing instruction by casting their vote on any proposal using the proxy materials.
  • Ahead of meetings involving contested director elections or shareholder approval transactions, the company will provide additional reminders to participants that provided unqualified standing instructions.
• Disclosure:
  • The company will fully disclose the program on its website and in its proxy statement.

Key Developments Since the No-Action Relief

Exxon Files Copies of Communications and Website Pages for the Program

On September 17, 2025, Exxon filed with the SEC copies of the email invitation to shareholders to enroll in the program, as well as copies of printed versions of the invitation and the website instruction, confirmation, and service description pages. The copies were filed as soliciting material under Exchange Act Rule 14a-12 under the cover of Form DEFA 14A.

SEC Staff Is Asked to Reconsider and Rescind the No-Action Relief

On September 30, 2025, two shareholder advocacy organizations, As You Sow and the Interfaith Center on Corporate Responsibility, submitted a letter to the SEC staff requesting the staff to reconsider and rescind the no‑action relief, arguing that the program’s standing proxy violates both the plain language of Rules 14a‑4(d)(2) and (d)(3) and the proxy form requirements for a meeting‑specific, dated proxy that clearly identifies each matter and provides voting choice by boxes, while the solicitation of the standing proxy contravenes Rule 14a‑4(f), which prohibits solicitation of a proxy unless the security holder concurrently receives, or has previously received, the related filed definitive proxy statement. They further contend in the letter that “opt‑out” or override features do not cure ongoing violations, and that the standing proxy would reduce informed voting and investor engagement, contrary to the policy goals underlying the proxy rules.

Shareholder Suit Is Filed against Exxon and Its Directors

On October 14, 2025, the City of Hollywood Police Officers’ Retirement System, an Exxon shareholder, filed a class action suit in the federal district court in New Jersey against Exxon and its directors alleging breaches of the directors’ fiduciary duty of loyalty in connection with their adoption of the program and seeking injunctive relief enjoining the continued operation of the program. In the suit, the plaintiffs claim that Exxon’s invitation to retail shareholders to enroll in the program is an unlawful solicitation in violation of the disclosure and filing requirements of Exchange Act Rules 14a-3 through 14a-6, and 14a-9 through 14a-12. Their case is that, by adopting the program in violation of federal law, the directors breached their fiduciary duty because the program unlawfully impairs the shareholder franchise by providing shareholders who participate in the program with inadequate disclosure and by diluting the voting power of properly voted shares of other shareholders (including institutional shareholders) with votes based on illegally solicited proxies. The plaintiffs further claim that the directors breached their fiduciary duty because they adopted and maintain the program to entrench themselves, suppress shareholder dissent, and separate shareholders from informed, contemporaneous voting.

On the claim that the program violates the Exchange Act rules, the plaintiffs contend that:

• Rule 14a-3 (information to be furnished): Exxon solicited proxies without furnishing a preliminary/definitive proxy statement or the required annual financial report and cannot furnish those materials for unspecified future meetings.
• Rule 14a-4 (form, scope, and duration of proxy): The program materials do not clearly state the solicitation is on behalf of the board, do not identify each matter to be acted upon, do not provide for the option to vote/withhold/abstain on each item, and seek authority to vote at more than one meeting and beyond the next meeting, contrary to Rule 14a‑4(d)’s limits requiring contemporaneous, informed consent.
• Rule 14a-5 (presentation and required dates): The materials omit required disclosures about the subjects to be voted, the substance of any proposals, and the key deadline dates (e.g., shareholder proposal and nomination deadlines).
• Rule 14a-6 (filing requirements): Exxon purported to solicit proxy authority without filing and furnishing the required preliminary/definitive proxy statements.
• Rule 14a-9 (anti‑fraud): By omitting material facts—most notably any specifics about the matters for which authority is sought—the solicitation is materially misleading.
• Rule 14a-10 (prohibition of certain solicitations): The program effectively seeks proxies dated for or operative on unspecified future dates and meetings beyond the date of signing.
• Rule 14a-12 (pre‑proxy solicitations): Even if treated as a pre-proxy statement solicitation under Rule 14a‑12, the materials fail to include required legends and participant identity/interest disclosures and improperly request consent/authorization before furnishing a compliant proxy statement, which cannot be done for indefinite future meetings.