Rescission of Rule 14a-8’s Federal Regulation of Shareholder Proposals and Amendments to Rule 14a-4
Key claim: The SEC proposes to scrap the federal rule that lets shareholders put proposals on company proxy ballots, leaving that to state law and company bylaws, and to let companies vote unused proxies on off-ballot proposals unless a shareholder opts out.
Abstract
(Proposed Rule · Securities and Exchange Commission) The Securities and Exchange Commission (“Commission”) is proposing to rescind Rule 14a-8 under the Securities Exchange Act of 1934 (“Exchange Act”) and leave determinations about the role of shareholder proposals to State law and company governing documents. The Commission also is proposing to amend Rule 14a-4 under the Exchange Act to expand the circumstances under which a company may exercise, with respect to proxies it receives, discretionary voting authority on proposals that will be presented at a shareholder meeting but not included in the company’s proxy materials. At the same time, the proposed amendments to Rule 14a-4 would provide shareholders with the means to elect to prevent the company from exercising such authority with respect to their individual shares.
Why this matters
Rule 14a-8 has for decades been the primary federal mechanism allowing shareholders to force votes on governance, environmental, and social questions at public companies, and its proposed rescission would be one of the most consequential changes to U.S. corporate governance in a generation. The companion Rule 14a-4 change would further tilt proxy voting toward management by letting companies cast unmarked proxies on off-ballot proposals. If finalized, the locus of shareholder activism would shift to state corporate law and private ordering through bylaws.