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This article first appeared on Diligent Market Intelligence's Voting newswire. To register for a demonstration and trial of the product, click here.
The U.S. Securities and Exchange Commission (SEC) has further alarmed shareholder proposal filers, announcing it will suspend no-action guidance on requests put forward by companies related to the 2025-26 proxy season.
The agency pointed to a backlog stemming from the 43-day government shutdown that ended on November 12 - an explanation that has landed poorly with many market participants.
Companies have long sought approval from the SEC to exclude proposals that do not meet the statutory criteria for inclusion, with the regulator confirming that it will not pursue legal action against companies when it agrees with the request.
Last week, the SEC said it would no longer provide substantive feedback – leaving it up to companies to determine their own confidence in the legal basis for exclusion. Under current rules, companies must still notify the SEC 80 days before filing their proxy statement if they plan to exclude a proposal but the agency has made clear it no longer needs to reply and serves as “informational only.”
The retreat is the latest boulder placed in the path of Rule 14a-8, unsettling investors and corporate governance advocates alike after SEC Chair Paul Atkins questioned the very validity of shareholder proposals under Delaware state law or a company’s bylaws.
ESG proponents argue that the SEC has resumed no-action reviews after previous shutdowns and should do so again. “Despite being fairly early in the shareholder season, the Commission is walking away from its responsibilities and leaving investors and companies in legal limbo,” said Danielle Fugere, president at As You Sow. “The suggestion that the Commission is unable to manage this year’s workload raises legitimate concerns about the SEC’s willingness to support this time-tested process.”
For some observers, the no-action freeze was hardly unexpected. The Interfaith Center on Corporate Responsibility (ICCR) was one to state that “while we are alarmed by this announcement, we are not surprised.” During the shutdown, tech giant Microsoft excluded a John Chevedden proposal from its ballot without the SEC’s interpretive clarity.
From record requests to regulatory silence
Under the former regime and during the 2024–2025 proxy season, companies had flooded the SEC with a record number of no-action requests - up 30% from the prior year, according to DMI Voting data. Now, with the SEC stepping back from issuing responses, some fear the door is open for companies to simply shut out shareholder proposals altogether in 2026. Although that would expose issuers to lawsuits and create a patchwork of interpretations around Rule 14a-8, proponents may lack the resources to challenge every company. Investors have argued that the step back from the process relied upon for many decades will lead to confusion, legal exposure, and erosion of shareholder protections. “This abdication by the SEC of its longstanding role as neutral arbiter of shareholder proposals will serve no one,” said Steven Rothstein, Ceres’ chief program officer. “Nonbinding shareholder proposals have led to the broad adoption of corporate governance best practices and risk mitigation policies, which are essential for long-term value creation.”
Ceres is one of a group of investors to have this month requested a meeting with Chair Atkins to discuss his views on the shareholder proposal process as part of a wider call for accountability, transparency and dialogue.
A trojan horse
Dissent is also being felt within the SEC with Commissioner Caroline Crenshaw, a Democrat, describing the approach as a giveaway to issuers. “Today’s announcement is a Trojan horse,” said Crenshaw, in a November 17 statement. “It cloaks itself in neutrality by expressing that the division will not weigh in on any company’s exclusion of shareholder proposals, but then it hands companies a hall pass to do whatever they want.” However, investor representative groups are urging their members not to retreat. “We believe that shareholders should continue to file proposals as planned,” said the ICCR. “The tools we have long depended upon to promote sustainability for corporations and a more dynamic economy remain critical.” Boards, too, have been urged to keep the ballot open as a viable and effective platform for their shareholders to raise concerns. “Responsible companies should continue including legitimate shareholder proposals in their proxies as an opportunity for engagement and transparency on material issues of shareholder concern,” said Andrew Behar, CEO of As you Sow.
