INTRODUCTION

1. For more than eight decades, the Securities and Exchange Commission (SEC) has safeguarded the right of shareholders in a public company to present a proposal in the company proxy statement regarding significant issues of concern. This right—enshrined in a regulation known as Rule 14a-8 under the Securities Exchange Act of 1934 (the Exchange Act)—has long served as a foundational mechanism for shareholder participation in corporate governance and for advancing the Exchange Act’s core goals of investor protection and transparent markets.
2. Shareholder proposals are a critical mechanism for a company’s shareholders to raise and vote on important issues directly relevant to a company’s long-term performance and risk profile. More broadly, this process reflects a core principle of American capital markets: that investors who supply capital to public companies retain meaningful rights to protect their investment by participating in corporate governance. The transparency and accountability that follow robust shareholder rights are also a key reason that global capital flows to American markets—investors have confidence that U.S. markets provide meaningful mechanisms for disclosure, accountability, and investor protection.
3. When a company seeks to exclude a qualified shareholder proposal from its proxy materials, it must comply with the procedural framework established by Rule 14a-8. The company must notify both the Commission and the proposal’s proponent and articulate the legal basis for exclusion. This obligation ensures that proponents have an opportunity to respond and that SEC staff can evaluate whether the exclusion is consistent with Rule 14a-8 and longstanding Commission precedent.
4. In recent months, the SEC has adopted a new policy abandoning the requirements and procedures established by the Commission’s own regulation governing the shareholder proposal process. Rather than hearing from both sides and engaging in the review contemplated by the regulations, SEC staff now categorically issues “no-objection” letters—or effectively blesses exclusions—when companies invoke certain formulaic assertions in their submissions. This approach replaces meaningful regulatory oversight with a new, de facto rubber-stamp process that allows companies to exclude proposals without any analysis by the staff.
5. This policy was implemented without the notice-and-comment rulemaking that is required by the Administrative Procedure Act (APA) when an agency adopts or effectively alters binding regulatory standards. The APA requires federal agencies to act through transparent procedures; provide reasoned explanations for policy changes, regardless of the language the government uses to characterize them; and to give affected stakeholders an opportunity to comment before altering decades of the operation of existing regulations. The SEC circumvented the procedural safeguards of the APA and effectively changed how Rule 14a-8 operates through informal staff practice rather than through rulemaking.
6. The result is a process that deprives shareholders of rights established by SEC regulation and decades of Commission precedent. This approach will lead to the exclusion of shareholder proposals that should be included in proxy materials, weakening a core mechanism of shareholder participation in corporate governance. In doing so, it risks undermining investor confidence in the transparency and accountability of U.S. public markets—principles that have long distinguished American capital markets globally. These outcomes are difficult to reconcile with the Commission’s statutory mission to protect investors, maintain fair and orderly markets, and facilitate capital formation.

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