Prologue

On September 10, 2025, the House Committee on Financial Services convened a full Committee hearing on a slate of proposed bills that would fundamentally reshape the federal proxy rules. Proposals range from registration requirements and expanded liability for proxy advisory firms to sweeping restrictions. Other measures include codification of materiality in issuer disclosure and codification of existing exclusions under Rule 14a-8. Additional proposals would remove the “significant social policy” exception from the ordinary business exclusion and authorize issuers to exclude environmental, social, and political proposals entirely. There is even a bill calling for outright repeal of the shareholder proposal rule itself.

There are also bills directed at asset managers, including measures that would require proportional pass-through voting by passive fund managers, mandate institutional investors to explain their votes in connection with proxy firm recommendations, and prohibit outsourcing of voting decisions to proxy advisory firms. Finally, there are proposals requiring the SEC to establish a Public Company Advisory Committee and to conduct recurring reports on the proxy process.

This legislative agenda is animated by the same debates that have recurred since 1943: whether the proxy process should remain a disclosure regime grounded in shareholder franchise, or become an arena for regulating corporate governance, social policy, and institutional investor stewardship. Eighty-two years ago, the House Committee on Interstate and Foreign Commerce summoned Securities and Exchange Commission Chair Ganson Purcell to testify on the Commission’s adoption of the first federal proxy rules. Then as now, the central questions were whether the SEC had strayed beyond disclosure into the management of corporate affairs, and whether Congress should cabin or expand the Commission’s authority.

The parallels are unmistakable: legislative proposals to narrow Rule 14a-8, impose new disclosure requirements, or displace federal authority with state law echo the very criticisms first aired in the wartime hearings of June 1943.

I. Introduction

In June 1943, the House Committee on Interstate and Foreign Commerce – today known as the House Financial Services Committee – convened three days of hearings to examine the Securities and Exchange Commission’s recent overhaul of the federal proxy rules, including the 1942 adoption of what had been known as X-14A-7 and would later become Rule 14a-8 (see 1943 Hearings, U.S. House Committee on Interstate and Foreign Commerce). The hearings unfolded against a decade of rapid statutory innovation: the Securities Act of 1933, the Securities Exchange Act of 1934, and the Investment Company Act of 1940 – all of which SEC Chair Ganson Purcell invoked as the legal architecture for the Commission’s authority over proxies and shareholder suffrage.

The Commission’s stated objective was straightforward in theory and complex in practice: to ensure “fair corporate suffrage” by improving disclosure and curbing abuses in proxy solicitation at a time when the dispersion of share ownership made in-person participation unrealistic for most investors.

The 1942 revisions pushed beyond the SEC’s earlier “anti-fraud only” posture. After receiving hundreds of comments on its August 1942 proposal, the Commission adopted final rules in December that, among other things, expanded disclosure about directors and executive pay, required companies to furnish annual reports to shareholders together with proxy solicitations, abolished the solicitation exemption for non-interstate communications, and created the controversial “100-word statement” for shareholder proponents.

These changes triggered immediate congressional interest, due in part to their adoption shortly after Congress had adjourned and to concerns raised earlier by members, staff, and a committee of business leaders that the SEC itself had convened and then appeared to disregard. READ MORE »