SEC Chair Highlights Paths for Companies to Exclude Shareholder Proposals

In a speech delivered at the 25th anniversary gala for the University of Delaware’s Weinberg Center for Corporate Governance on October 9, the Chair of the Securities and Exchange Commission, Paul Atkins, stated that “[t]he view that Delaware law does not provide shareholders the right to have their precatory proposals addressed by companies is not a new one,” and asked why more Delaware companies “have not sought to exclude precatory shareholder proposals pursuant to paragraph (i)(1)” of Rule 14a-8 under the Securities Exchange Act of 1934. Rule 14a-8(i)(1) permits a company to exclude a 14a-8 shareholder proposal “[i]f the proposal is not a proper subject for action by shareholders under the laws of the jurisdiction of the company’s organization.” A no-action request to the SEC seeking to exclude a shareholder proposal under Rule 14a-8(i)(1) must include “a supporting opinion of counsel” that the proposal is not proper under the applicable state law.

Below is a summary of the key considerations related to Chair Atkins’s statement on Rule 14a-8 shareholder proposals:

• Presumption that precatory proposals are a “proper subject.” The notes to Rule 14a-8(i)(1) state that “[i]n [the SEC’s] experience, most proposals that are cast as recommendations or requests that the board of directors take specified action are proper under state law. Accordingly, [the SEC] will assume that a proposal drafted as a recommendation or suggestion is proper unless the company demonstrates otherwise.” In his speech, Chair Atkins emphasized the rebuttable nature of this presumption, noting further that “the notion that Rule 14a-8 gives shareholders the right to present precatory proposals— when state law does not—is supported neither by the text of the note nor its history.”
• Are precatory proposals “proper” under Delaware law? Although Chair Atkins noted that the expertise of the SEC is in the federal securities laws rather than state law, he questioned whether precatory proposals (i.e., proposals drafted as recommendations or suggestions) are proper under Delaware law. As an example of a Delaware practitioner’s view that Delaware law does not provide shareholders the right to have their precatory proposals addressed by companies, Chair Atkins referenced statements made by Leo Strine, at the time as a Vice Chancellor of the Delaware Court of Chancery before he later became the Chief Justice of the Delaware Supreme Court, that Delaware “vote[s] on real things” and does not have “imaginary voting.”
• Rebutting the presumption through opinion of counsel. Chair Atkins stated that “if there is no fundamental right under Delaware law for a company’s shareholders to vote on precatory proposals—and the company has not created that right through its governing documents—then one could make an argument that a precatory shareholder proposal submitted to a Delaware company is excludable under paragraph (i)(1) of Rule 14a-8.” He then outlined the steps a company could take to seek exclusion of a precatory shareholder proposal under Rule 14a-8(i)(1), noting that “if a company makes this argument and seeks the SEC staff’s views, and the company obtains an opinion of counsel that the proposal is not a ‘proper subject’ for shareholder action under Delaware law, this argument should prevail, at least for that company.” Chair Atkins emphasized that he has “high confidence” that the SEC staff will honor an opinion of counsel stating that a precatory proposal is improper under Delaware law.
• Potential impact of Chair Atkins’s position on precatory proposals under Rule 14a-8(i)(1). The overwhelming majority of shareholder proposals submitted under Rule 14a-8 today are precatory proposals. This is particularly true of environmental and social proposals, which are almost always framed as recommendations or suggestions for a company’s board of directors. For Delaware companies, the ability to use Rule 14a-8(i)(1) to exclude precatory proposals would have essentially eliminated most (if not all) of the shareholder proposals on their annual meeting ballots in recent years.
• Potential impact on Texas-based companies. On May 19, 2025, Governor Abbott signed into law Texas SB 1057, which took effect on September 1, 2025. Under SB 1057, Texas-organized corporations that are both “[n]ationally listed corporations” and have their principal place of business in Texas can elect in their governing documents to be governed by new Section 21.373 of the Texas Business Organizations Code, which limits shareholders who can submit proposals for approval at shareholder meetings. The shareholder or group of shareholders must hold an amount of voting shares equal to at least (A) $1 million in market value (tested as of the date of submission of the proposal) or (B) three percent of the corporation’s voting shares. The shareholder or group of shareholders must have held such shares for a continuous period of at least six months before the date of the meeting and throughout the entire duration of the meeting; and the shareholder or group of shareholders must solicit the holders of shares representing at least 67% of the voting power of shares entitled to vote on the proposal.

There is widespread speculation over whether and to what extent SB 1057 would impact the submission and exclusion of Rule 14a-8 proposals in the coming proxy seasons, including whether SB 1057 would be preempted by the SEC’s rules. In this speech, Chair Atkins noted that, if a company has opted into SB 1057, “or has otherwise properly established conditions in its governing documents,” and receives a shareholder proposal from a proponent that does not satisfy the requirements in the Texas law or the governing documents, then “the proposal should be excludable” under Rule 14a-8(i)(1).

• Other recent developments in the SEC’s approach to shareholder proposals. The potential arguments under Rule 14a-8(i)(1) should be evaluated alongside other recent developments from the SEC. For example, on February 12, 2025, the SEC published Staff Legal Bulletin 14M (“SLB 14M”) regarding the exclusion of Rule 14a-8 shareholder proposals under Rule 14a-8(i)(5) (“economic significance”) and Rule 14a-8(i)(7) (“ordinary business”). SLB 14M broadened the ability to exclude shareholder proposals on these bases by (1) rescinding Staff Legal Bulletin No. 14L (“SLB 14L”), which was issued on November 3, 2021 and narrowed the ability to exclude proposals with “broad societal impact” and (2) reinstating guidance previously rescinded by SLB 14L. SLB 14M had a significant impact on the 2025 proxy season, and we expect it to continue to impact the SEC staff’s approach in the coming proxy season for companies that seek exclusion based on Rule 14a-8(i)(5) or Rule 14a-8(i)(7).

Furthermore, on September 17, 2025, in his remarks accompanying the SEC’s vote on its policy statement regarding issuer-investor mandatory arbitration provision, Chair Atkins noted that the staff is “currently preparing recommendations” for modernizing the shareholder proposal process. The SEC’s latest Regulatory Agenda, published on September 4, 2025, listed “Shareholder Proposal Modernization” among the rule proposals slated for a notice of proposed rulemaking in the April 2026 timeframe.[1]

In light of this speech and other recent developments highlighted above, companies should carefully evaluate their options when considering Rule 14a-8 proposals this proxy season, even if a company has received similar proposals in recent years. In addition, it is possible that shareholder proponents may adjust their approaches in light of these developments.