SEC Proposes to Rescind Rule Requiring Companies to Include Shareholder Proposals in Their Proxy Statements

The Bottom Line

• The SEC has proposed rescinding Exchange Act Rule 14a-8, the SEC’s shareholder proposal rule. Rule 14a-8 governs when companies must include shareholder proposals in proxy materials. The predecessor to Rule 14a-8 was adopted by the SEC in 1942.
• If adopted, the recission would substantially change the landscape for shareholder engagement and activism. The proposal follows recent changes in the SEC staff’s approach to engaging in disputes regarding whether companies are permitted to exclude shareholder proposals.
• The SEC’s primary argument is that the rule exceeds its statutory authority under Section 14(a) of the Exchange Act by improperly intruding into matters of state law.
• The SEC also cites policy reasons for rescission: the rule’s original justifications are less compelling today, the rule has had unintended consequences, and retaining any version of it is unwarranted.
• Relatedly, the SEC has also proposed amending Exchange Act Rule 14a-4(c)(2) to expand the circumstances when companies may exercise discretionary voting authority on proposals submitted outside the Rule 14a-8 process, while allowing shareholders to opt out.

The Details

Overview

On September 16, 2026, the Securities and Exchange Commission (SEC) issued a rule proposal proposing to rescind Rule 14a-8 under the Securities Exchange Act of 1934 (the “Exchange Act”), the SEC’s shareholder proposal rule that governs when a company must include a shareholder proposal in its shareholder meeting proxy statement and proxy form, arguing primarily that the rule exceeds the SEC’s statutory authority under Section 14(a) of the Exchange Act “by improperly intruding into State law without express authorization from Congress,” while also advancing policy reasons for the proposed rescission of the rule. The predecessor to Exchange Act Rule 14a-8 was adopted by the SEC in 1942.

The proposal comes just a little over a month after the SEC’s Division of Corporation Finance (the “Division”) announced that it will entirely discontinue its practice of responding to no-action requests by companies seeking to exclude shareholder proposals from their proxy statements and 10 months after the Division suspended substantive responses to most of such no-action requests. The proposal also comes after several speeches by SEC Chair Atkins challenging Exchange Act Rule 14a-8 (“Rule 14a-8”), notably his July 9, 2026 remarks at a conference by the Society for Corporate Governance, where, referring to Rule 14a-8, he stressed that he maintained his “conviction that the [SEC]’s authority to prescribe rules ‘in the public interest’ is not plenary” emphasizing that “[g]overnment agencies may not add to their powers by adverse possession; longevity is not a substitute for legal authority.”

In connection with, but also independent of, the Rule 14a-8 rescission proposal, the SEC, in the same proposing release (the “Proposing Release”) is also proposing to amend Exchange Act Rule 14a-4(c)(2) to expand the circumstances under which a company may exercise discretionary voting authority on shareholder proposals omitted from the company’s proxy materials, while also providing shareholders with avenues to prevent the company from exercising such authority with respect to their individual shares.

The public comment period for the proposals will last until 60 days after publication in the Federal Register

The SEC’s Case for Rescission – Rule 14a-8 Exceeds SEC Authority

Section 14(a) of the Exchange Act makes it unlawful “to solicit any proxy or consent or authorization in respect of any security” “in contravention of such rules and regulations as the [SEC] may prescribe as necessary or appropriate in the public interest or for the protection of investors.” The SEC’s position is that Section 14(a) only gives the SEC the authority to regulate “proxy solicitation . . . which encompasses the manner in which that solicitation is made (e.g., the timing and form of proxy) and the information that the soliciting party must disclose in the request,” but not the authority to regulate the scope of the voting rights shareholders may have under state law, such as the right to propose a matter for a shareholder vote. According to the SEC, through several amendments over time, the SEC has increasingly assumed responsibility for defining and interpreting standards that implicate core state law concepts of governance, with the result that Rule 14a-8, including its eligibility and procedural requirements, “has come to operate not as a procedural mechanism to facilitate shareholders’ rights under State law through the proxy process, but as a substantive Federal overlay that improperly intrudes into matters of State law by dictating that companies include (or allowing them to exclude) certain shareholder proposals in the companies’ proxy materials.” Further noting that “by establishing standards not found in State law for whether a shareholder proposal must be included in a company’s proxy materials, the [SEC] effectively dictates the scope of shareholder voting rights.” The SEC’s position is that Section 14(a) does not authorize such an intrusion.

The SEC’s Case for Rescission – Policy Reasons for Rescission

In further support of rescinding Rule 14a-8, the SEC advanced three policy reasons for rescinding the rule. The SEC believes that:

• many of the justifications that were originally provided to support adoption of the rule either have not been substantiated in practice or are less compelling today—the SEC notes in the Proposing Release that “the rule was adopted with the understanding that (i) the cost to companies to include shareholder proposals in their proxy materials was “small”; (ii) many proposals were either already supported by management or received meaningful shareholder support; (iii) the overall volume of proposals was low; and (iv) the rights of shareholders to present certain matters for a vote to their fellow shareholders under State law was reasonably clear”;
• the rule has had, and will continue to have, certain unintended consequences—the SEC hinges this on three grounds: (i) the rule influences interactions between companies and shareholders in ways that are inconsistent with the rule’s original purpose; (ii) the rule forces the SEC to make judgments about the application of state law that are best left to state legislatures, courts, and, if permitted by applicable state law, companies; and (iii) the rule has inhibited the development of state law and private ordering. In his separate statement, Commissioner Uyeda expanded on these considerations, stating that “Rule 14a-8 has been co-opted to advance the agendas of various political interests—acting without any fiduciary duty to a corporation or its shareholders—at the expense of the millions of investors that directly and indirectly own public companies. These political interests use Rule 14a-8 as leverage in order to achieve objectives that often are not materially relevant to a public company”; and
• retaining any version of the rule is unwarranted and unlikely to avoid these unintended consequences.

Proposed Amendments to Rule 14a-4(c)(2)

The SEC is proposing to amend Exchange Act Rule 14a-4(c)(2) (“Rule 14a-4(c)(2)”) to allow companies to exercise discretionary voting authority with respect to timely received shareholder proposals for annual meetings that are submitted outside the Rule 14a-8 process even where the shareholder proponent delivers its own proxy materials to holders of the requisite percentage of the company’s shares necessary to carry out the proposal, provided that the shareholder giving the company proxy has not opted out of granting that discretionary voting authority. To exercise such discretionary voting authority, the proposal would require companies to (i) include in the proxy statement a brief description of the proposal and how the company intends to exercise its voting discretion on it, and (ii) include in the proxy form, a cross-reference to that description and a box shareholders can use to opt out from the company’s exercise of that discretion on their behalf. The SEC notes in the Proposing Release that, while the proposed amendments are intended to align with the proposed rescission of Rule 14a-8 as companies may receive shareholder proposals more frequently outside of Rule 14a-8, there are independent justifications for the proposed amendments even if Rule 14a-8 were to be retained. According to the SEC, the proposed amendments are intended to provide companies with greater flexibility to seek and obtain discretionary authority regarding such shareholder proposals while providing shareholders with the option to prevent the company from exercising such authority with respect to their individual shares.

Under current Rule 14a-4(c)(2), a company is not allowed to exercise discretionary voting authority with respect to a timely received shareholder proposal for an annual meeting that is submitted outside the Rule 14a-8 process if the proponent solicits the requisite percentage of the company’s shareholders required to carry the proposal and satisfies certain other conditions, including providing the company with a timely written statement of the proponent’s intention to make such a solicitation through a proxy statement. In such situations, the company’s only option would be to include the shareholder proposal in its proxy card to enable it to obtain direct (as opposed to discretionary) voting authority from shareholders, a practice among companies that has become increasingly more common since the adoption of the universal proxy rules, according to the SEC. Retaining Rule 14a-4(c)(2) in its current form, the SEC says, would effectively allow proponents to have their proposals included on a company’s proxy card at the company’s expense, even if Rule 14a-8 is rescinded, and would be counter to the SEC’s goal of leaving decisions about including shareholder proposals in company proxy materials to the states and companies.

Practical Implications for Proposed Rescission of Rule 14a-8—If Adopted, As Proposed

No Federal Obligation to Include Shareholder Proposals in Proxy Materials. Whether a shareholder proposal must be included in a company’s proxy materials would be determined solely by state law and, where state law permits, by the company’s own charter and bylaw provisions.

A Regulatory Vacuum and Prolonged Transition Period. As state law is often silent or ambiguous about what matters may be presented for a shareholder vote, companies would need to make decisions about whether to include or exclude shareholder proposals without clear and settled legal requirements, and this transition period could extend for several years and may be associated with elevated litigation costs as disputes over whether particular proposals are “proper subjects” for shareholder action under state law increase.