SEC Proposes to Rescind Rule 14a-8 and Modernize the Proxy Solicitation Regime

On Sept. 16, 2026, the Securities and Exchange Commission (SEC) issued two rule proposals that, if adopted, would end more than 80 years of U.S. federal government involvement in the substance of U.S. shareholder proposals and would return federal involvement to the mechanics of proxy solicitations that are otherwise permitted under state law:

• The first proposal would rescind Rule 14a-8 in its entirety, removing the ability of shareholders to require inclusion of their proposals in a company’s proxy statement and shifting responsibility solely to state law and a company’s governing documents to determine if matters (1) can be submitted to a shareholder vote and/or (2) included in a company’s proxy statement.
• The first proposal would also amend Rule 14a-4(c) to provide a company with discretion to vote shares for which it has received proxies on shareholder proposals that are the subject of a separate shareholder solicitation, and are therefore not included in the company’s proxy statement and do not appear on its proxy card.
• The second proposal would introduce a number of modernization amendments to the proxy solicitation rules.

If both proposals are adopted as written, the primary avenue through which shareholders have been able to place thousands of nonbinding (referred to as precatory) proposals on corporate ballots for decades will end. Shareholders will need to rely on state law and a company’s governing documents to determine if an item can properly be included in the agenda of a shareholder meeting and, absent state legislation or changes in the governing documents of companies, will need to solicit proxies themselves.

The proposals are subject to a 60-day comment period following Federal Register publication. It is unlikely that a final rule will be in place prior to the 2027 proxy season, given that timing and the need for a phase-in period. In addition, implementation of the final rules could be delayed due to litigation.

The Origin Story

Rule 14a-8 finds its roots in Rule X-14A-7, which was adopted in 1942 as a procedural mechanism requiring a company to include in its proxy materials a shareholder proposal that was “a proper subject for action by the security holders” if the proposing shareholder gave the company “reasonable notice.” Although “proper subject” was not defined within the rule, the SEC understood state law to be the standard for determining what was “proper” as clarified in a 1945 letter from the then director of the SEC Division of Corporation Finance.

Rule X-14A-7 was originally approximately 200 words long. Current Rule 14a-8 is over 3,000 words long and, through successive amendments, the SEC layered on eligibility criteria, procedural requirements and 13 substantive bases for exclusion. Of those 13 exclusion grounds, only two directly reference state law. The remaining 11 have evolved through SEC rulemaking, often disconnected from any state law analysis.

The vast majority of shareholder proposals submitted under Rule 14a-8 are precatory. A typical Rule 14a-8 proposal asks the board to consider adopting a policy, report on a topic or take specified action.[1] As a result of the presumption that precatory proposals are properly brought, companies have been forced to include these proposals in their proxy statements unless another substantive exclusion applies or they can negotiate with the proponent to withdraw the proposal, in either case at a cost to the company in money and management attention.

Rule 14a-8 has created a presumption that precatory proposals are “proper subjects for shareholder action” under state law and placed the burden to overcome that presumption on the company.[2] Silent or ambiguous state law made it extremely challenging to overcome this burden and, per the SEC, resulted in the presumption “oper[ating] in substance as a mandate.”[3]

Between 2022 and 2025, companies received approximately 3,205 shareholder proposals under Rule 14a-8, with 2,363 actually voted on, 458 omitted under SEC rules and 384 withdrawn by the proponents.[4] Only 10% of proposals put to a vote in the time period received majority support.[5] During the same period, the median estimated expenses incurred by companies in connection with each proxy contest were $825,000.[6]

Where Are the States?

In the past 80 years, states have generally elected to not legislate on shareholder proposal governance matters, including precatory proposals, instead leaving the topic to be addressed in companies’ governing documents. The SEC postulates several factors contributing to states’ reticence to address the legality of precatory proposals. The SEC points to the 1947 SEC v. Transamerica Corp. decision, which has been interpreted to hold that Rule 14a-8 preempts state law. States may also have declined to tackle the issue for political and reputational reasons. As a result, the SEC speculates that Rule 14a-8 crowds out state law development, which reinforces reliance on the federal rule.

The only exception is Texas’ adoption in 2025 of Section 21.373 of the Texas Business Organizations Code, which establishes certain requirements (subject to the company’s governing documents) for shareholders to properly submit a shareholder proposal (other than director nominations and procedural resolutions ancillary to the conduct of the meeting) for an eligible public company that opts into this regime. The requirements are (1) ownership of at least $1 million or 3% of voting shares for at least six months before, and through, the meeting, and (2) solicitation of the holders of shares representing at least 67% of the voting power of shares entitled to vote on the proposal. Compliance with these requirements permits the shareholder to include such an item on the meeting agenda but does not require the company to include soliciting materials of the shareholder proponent in the company’s own proxy statement.

Proposed Rescission of Rule 14a-8

The SEC argues that the question of what proposals may be properly brought to a shareholder vote should be determined by state law or a company’s governing documents if state law permits. The SEC believes that its congressional mandate is limited to regulating the mechanics of proxy solicitations and not which matters are brought to a shareholder vote.

The SEC also provides several pragmatic critiques of the current regime:

• Companies Bear an Unequal Proportion of the Cost. When a shareholder proposal is included in a company’s proxy statement, the tab for printing, distributing and responding falls on the company (i.e., all shareholders), while the proponent bears a comparatively low cost. This is exacerbated by the volume of shareholder proposals, since the proportion of shareholder proposals included in company proxy materials has outpaced the increase in company proxy statements filed. The SEC tallies between 437 and 599 proposals being included in company proxy materials annually from 2020 through 2025, compared to 34 to 66 proposals included in the company proxy statements filed between 1943 and 1946.[7]
• Shareholder Proposals Have Limited Success. Between 2022 and 2025, an estimated 90% of shareholder proposals that went to vote failed, attracting just 26% support from shareholders on average.[8] In the 2025 proxy season, a mere 56 of 786 submissions achieved majority support.[9]
• Proponents Use the Process as Leverage. Between 2022 and 2025, roughly 12% of proposals were withdrawn before shareholders ever voted, which the SEC reads as evidence that the process can be used as a negotiating tactic, incentivizing management action at a low cost to the proponent.[10]
• Serial Activists. A disproportionate share of the annual proposal volume comes from a small number of serial filers. In 2025, 58% of shareholder proposals were submitted by 10 proponents.[11]

Closing the Back Door: Proposed Amendments to Rule 14a-4(c)(2)

U.S. federal proxy rules require companies to set forth “clearly and impartially” each item for which they are soliciting proxy voting authority from shareholders. The SEC has nevertheless allowed companies discretionary authority to vote shares on other matters proposed by shareholders where, for example, a company has insufficient notice of a shareholder proposal in advance of a shareholder meeting.[12]

Current SEC Rule 14a-4(c)(2) precludes a company from exercising discretionary authority in connection with a timely-delivered shareholder proposal if the proponent informs the company that it intends to solicit, and it actually solicits, proxies from a percentage of shareholders sufficient to carry the proposal. This construct denies the company the ability to exercise discretionary voting authority unless management includes the proposal “clearly and impartially” on the company’s proxy card and provides related disclosure in its proxy statement.

The proposed amendments would give companies discretionary voting authority even on a timely received shareholder proposal that is subject to a separate shareholder solicitation so long as (1) the company’s proxy statement includes (i) a brief (sentence-long) description of the proposal and (ii) a statement on how the company intends to vote on the matter, and (2) the company’s proxy card includes (i) a check box enabling an individual shareholder to opt out of allowing the company to exercise its discretion and (ii) a cross-reference to the relevant proxy statement disclosure. The proposed overhaul favors management, since every proxy card returned to the company without the box checked represents votes that management can deploy against the proposal.

Closing the Side Doors: Shortening the Broker Search Window and Eliminating the Notice of Exempt Solicitation

U.S. federal proxy rules currently require companies to conduct a broker search determining the underlying beneficial ownership of company shares at least 20 business days prior to the record date of the meeting.[13] The SEC’s proxy solicitation modernization proposal shortens the broker search window to five business days. This reduced timeline gives shareholder activists less time to implement a strategy in advance of a record date.

Rule 14a-6(g) requires shareholders that are engaged in an exempt solicitation who hold more than $5 million of company stock to file a Notice of Exempt Solicitation on EDGAR. Prior to the SEC’s January 2026 guidance objecting to the practice, voluntary filers made up a vast majority of Notice of Exempt Solicitation filings in recent years. Filing the notice provided shareholders with a low-cost and low-effort way to reach a greater shareholder audience and could dilute a company’s EDGAR page, making it challenging for shareholders to find the company’s own filings.

What Now?

Rule 14a-8 provides a powerful, low-cost tool for shareholders to use a company’s own proxy statement to advocate for the shareholders’ proposal and to use the company’s proxy card to solicit votes for it. Without this mechanic, the question of whether such a proposal must be included in the annual meeting agenda will be governed by state law or, if state law allows, a company’s governing documents. There will also be no requirement for the company to include soliciting material in its own proxy statement.

It will be challenging for shareholders to establish that state law in the relevant jurisdiction supports its right to present nonbinding recommendations, since on-point state law is sparse. For instance, it is unclear whether the Delaware General Corporation Law permits precatory proposals, and Texas’ enhanced eligibility requirements do not address expressly the question of whether precatory proposals are permissible. State legislatures will face a choice of whether to adopt clear guidelines for the proxy proposal process. In the meantime, self-ordering is likely. Companies could amend their charters or bylaws to establish guidelines for shareholder proposals, potentially narrowing or shutting down the proposal process altogether where state law does not prevent it.

The Activist’s Post-14a-8 Toolkit

Assuming the repeal of Rule 14a-8, activists will still have the ability to impact annual meetings through a variety of means, although none replicate the simplicity or reach of including a shareholder proposal in a company’s proxy statement:

• Independent Solicitations. A proponent can draft its own proxy statement, file it with the SEC and mail (or e-deliver) its own proxy card to shareholders. However, this option is costly, particularly for companies with a large shareholder base, and the new Rule 14a-4(c) framework would let management vote shares in opposition to such solicitation if the opt-out box is unchecked.
• Structural Shareholder Rights. Proxy access provisions, special meeting call rights and written consent mechanisms can provide channels to advance governance objectives, but only where a company’s organizational documents and governing state law make them available.
• Floor Votes. If a company’s bylaws and applicable state law permit it, a shareholder can introduce a proposal live at the annual meeting. However, the impact of this approach is limited since the overwhelming majority of votes are already locked in by proxy before the meeting starts, and the proposed Rule 14a-4(c) amendments would enable management to exercise its discretionary voting power over floor proposals. In addition, most companies’ advance notice bylaw provisions limit shareholders’ ability to bring floor proposals.
• Withhold Campaigns and Say-on-Pay Pressure. Shareholders can organize “vote no” campaigns against individual directors, vote against the company’s advisory vote on executive compensation or rally support through social media and public advocacy. Research confirms these tactics can influence board behavior, but they are backward-looking responses to management decisions rather than forward-looking governance proposals.
• Exempt Communications. Under Rule 14a-2(b)(1), shareholders can share their views with other investors without triggering the full proxy filing and delivery apparatus, so long as they are not seeking voting authority. However, the SEC’s proposal to eliminate the Notice of Exempt Solicitation would eliminate the one centralized EDGAR filing mechanism activists have used to broadcast those views cheaply to a wide audience.

Other Mechanical Amendments

The proposals amend certain other procedural mechanics that the SEC considers out of step with how proxy materials are actually produced and distributed in 2026, such as by eliminating the annual report delivery requirement and the deadline for delivering proxy materials when the materials incorporate by reference, and adding a requirement to identify a representative responsible for responding to questions regarding the proxy statement. The proposed amendments also include changes to the circumstances under which a company needs to file a preliminary proxy.

Key Takeaways

• Nothing Has Changed Yet. These are proposed rules, not final ones. Rule 14a-8 and every current proxy requirement remain fully operative until the SEC acts, which requires clearing a 60-day public comment period and a final rulemaking vote. There is also the possibility of litigation challenging the rulemaking, which could lead to a stay of the effectiveness of a final rule.
• Continue to Comply With Rule 14a-8. Until a final rule is effective, companies should continue to comply with the requirements of Rule 14a-8, including filing a Rule 14a-8(j) notice with the SEC if the company intends to omit a shareholder proposal from its proxy materials. Since the SEC will no longer issue no-action guidance with respect to Rule 14a-8 no-action requests, companies must determine independently whether a proposal may be excluded under Rule 14a-8 using the existing body of prior staff letters, SEC releases and court decisions and should have a well-reasoned basis for any exclusions. Shareholder proponents could use the 2027 proxy season as an opportunity to bring a proposal seeking a bylaw amendment establishing shareholders’ ability to bring proposals outside of the Rule 14a-8 context.
• Watch for State Law Developments. State legislatures could enact provisions similar to Texas. We are not aware of such proposed state legislation currently.
• Review Company Bylaws. Companies should review their bylaws, including advance notice provisions and any language addressing shareholder proposals to determine whether any amendments are necessary in a post-Rule 14a-8 world and to consider if the company wants to establish its own shareholder proposal framework.
• Review Annual Meeting Calendar. Internal counsel should review their annual meeting calendar to assess how the proposed timeline changes and elimination of the annual report delivery requirement would impact annual meeting preparation.