SEC Rewrites the Shareholder Proposal Rulebook

The U.S. Securities and Exchange Commission has signaled a meaningful procedural shift for the 2025–2026 proxy season, particularly around the handling of shareholder proposals under Rule 14a-8. In late 2025, the SEC indicated it may scale back its traditional “no-action letter” process, meaning companies can exclude certain shareholder proposals without receiving explicit staff confirmation. Instead, issuers may rely more heavily on prior SEC staff determinations and existing precedent, with the Commission in some cases declining to express a view at all. This effectively shifts more responsibility—and legal risk—onto companies when deciding whether proposals are excludable.

This development comes alongside a broader SEC agenda focused on “shareholder proposal modernization,” with formal rulemaking expected in 2026. Early signals suggest the Commission is reassessing eligibility thresholds, procedural requirements, and the scope of permissible proposals, particularly where they intersect with environmental, social, and governance (ESG) themes.

At the same time, a December 11, 2025 executive order from the White House has introduced additional uncertainty into the proxy ecosystem by directly targeting the role of proxy advisory firms such as ISS and Glass Lewis. The order instructs regulators—including the SEC, Federal Trade Commission, and Department of Labor—to review and potentially revise the regulatory framework governing proxy advisors and shareholder voting practices.

Key directives include:

• Reassessing rules tied to proxy advisors’ influence over shareholder proposals and voting outcomes
• Evaluating whether proxy advisors should be regulated as investment advisers and subject to fiduciary duties
• Increasing scrutiny of conflicts of interest, transparency, and use of ESG or DEI-related criteria in voting recommendations
• Considering enforcement of antifraud provisions related to proxy voting advice

The executive order reflects a broader policy view that proxy advisory firms exert significant influence over corporate governance decisions, including board composition, executive compensation, and shareholder proposals. It also signals a push to align proxy voting more closely with financial materiality and fiduciary obligations, which could reshape how institutional investors approach voting policies in future proxy seasons.

Implication:
Taken together, these developments point to a proxy environment where:

• Companies have greater discretion—but also greater legal exposure—when excluding shareholder proposals
• Proxy advisory firm influence may become more contested and less predictable
• The SEC is likely to introduce further structural reforms in 2026 and beyond, potentially reshaping the balance between issuers, investors, and intermediaries in corporate governance