Considerations for Shareholder Proposals in a Post-Rule 14a-8 World
SEC Rule 14a-4 has existed for decades but was historically used mainly in traditional proxy contests involving director nominations. Collateral amendments[16] adopted as part of the SEC’s “universal proxy” rules made Rule 14a-4 more viable outside of a director election contest, since those rules allow a shareholder that has filed its own proxy materials to include the company’s board nominees on its own proxy card alongside one or more Floor Proposals (the “Universal Proxy Loophole”).[17]
State Law Considerations
Due to the long-standing existence of Rule 14a-8, and the fact that for many years Rule 14a-4 was utilized primarily in the context of director election proxy contests (and thus typically involved only governance-related proposals as “other” business), many state corporate law aspects of shareholder proposals remain unclear or unsettled. Repeal of Rule 14a-8, a uniform standard that has applied to all public companies for decades, will almost certainly not eliminate the efforts of that relatively small number of shareholders who currently utilize Rule 14a-8,[18] meaning that state corporate law policymakers will need to confront the open issues. While public companies likewise will be pressed to address how they will respond to shareholder proposals in a post-Rule 14a-8 world, their positions will necessarily be guided by applicable state corporate law. Moreover, these issues could arise even in advance of any repeal of Rule 14a-8, as proponents and companies alter their strategies for addressing proposals in the context of reduced SEC Staff involvement with the shareholder proposal process and prospective repeal of Rule 14a-8. While these issues are nuanced and distinct, they are closely interconnected, and any developments in one area can affect how to address issues in the other areas.[19] Among the key issues that should be addressed through state corporate laws are:
- Are precatory proposals proper subjects for shareholder action?[20]
- What are proper subject matters for binding and, if permitted, precatory shareholder proposals, and who decides whether a particular proposal addresses a proper subject matter?
- What eligibility criteria should apply to shareholders that submit proposals and under what circumstances?
- What ability do shareholders have for Proposal Access, what conditions can companies require if they offer Proposal Access, and if Proposal Access is provided for, who decides whether a particular proposal can properly be included in a company’s proxy statement?
In light of increased attention to the corporate franchise across numerous states, it can be expected that different states and different companies will take different approaches to these issues. For example, Texas amended the Texas Business Organizations Code in 2025 to authorize eligible companies to require that to submit a proposal of business (other than nominations), the shareholder(s) must have continuously owned at least $1 million in voting shares or 3% of the company’s voting stock for at least six months leading up to the shareholder meeting. In addition, the statute includes a solicitation requirement of shares representing at least 67% of the voting power entitled to vote on the proposal.
Notably, the answers to many of these questions remain unclear in Delaware, where a majority of U.S. publicly traded companies (including more than 65% of the Fortune 50) are incorporated.[21] For example, one of the leading Delaware cases directly addressing shareholder proposals, CA, Inc. v. AFSCME Employees Pension Plan, 953 A.2d 227 (Del. 2008), only partially addresses the questions above. In that case, the Delaware Supreme Court concluded that a Rule 14a-8 proposal setting forth a binding bylaw amendment mandating that the company reimburse dissidents’ expenses in certain proxy contests was a proper subject for shareholder action.[22] Notwithstanding this conclusion, the Court held that the bylaw provision, if implemented, would violate state law because it could interfere with the exercise of the board’s fiduciary duties by requiring reimbursement of the dissidents’ expenses even if the board determined that the proxy contest was not in the best interest of the company.
Thus, the AFSCME case establishes that some, but not all, binding bylaw proposals are proper subject matters under Delaware law.[23] However, it is unsettled whether precatory proposals are “proper” subject matters under Delaware corporate law. Therefore, state law could, as a default matter, provide that precatory proposals are not proper subject matters under Delaware law, in which case companies might nevertheless offer Proposal Access under certain terms.[24]
Related SEC Rulemaking
If the SEC determines to repeal Rule 14a-8, certain regulatory gaps and structural considerations would also need to be addressed, particularly given the potential that shareholder proposals would continue to be voted on either as Floor Proposals or through Proposal Access provisions. For example, if Proposal Access regimes are perceived as too burdensome, shareholders may increasingly exploit the Universal Proxy Loophole, as discussed above, absent reforms that would allow companies greater flexibility to solicit against Floor Proposals without including them in company proxy materials and/or increase the solicitation thresholds proponents must satisfy to trigger Rule 14a-4 obligations. Also, the current exempt solicitation framework allows proponents and third parties to solicit votes in connection with a shareholder proposal included in a company’s proxy materials without providing detailed ownership information and other pertinent disclosures, making it difficult to determine who is funding and coordinating campaigns on proposals. Proponents and other third parties also may utilize private channels (e.g., aggregator websites) for distributing these types of communications without the company’s knowledge.
Proposal Access – Private Ordering in Company Governing Documents
As noted above, “Proposal Access” concerns whether a shareholder’s proposal is included in a company’s proxy materials. Regardless of how the scope of “proper” shareholder proposals is resolved, some companies and shareholder proponents may consider or advocate for adding Proposal Access provisions to company governing documents, drawing upon the history of proxy access provisions widely adopted in the context of director nominations.[25]
Proxy access bylaws generally include requirements and limitations that differ from the SEC’s invalidated proxy access rule, such as testing beneficial ownership on a “net long” basis and limiting the number of shareholders that can aggregate their shares to satisfy the ownership requirement. Private ordering for Proposal Access has many potential downsides, including potentially creating varying standards for shareholder access to a company’s proxy materials, and generating significant costs for shareholder proponents and companies related to negotiating and implementing potentially detailed changes to company governing documents. Moreover, simply mirroring Rule 14a-8 in any Proposal Access provisions is problematic. First, Rule 14a-8 does not set ownership standards that appropriately reflect the costs and burdens of addressing shareholder proposals and instead creates perverse incentives to advocate positions that do not align with the best interests of shareholders at large. In addition, a Rule 14a-8-type approach to Proposal Access presents the significant issue of who would determine whether a proponent has satisfied the provision’s requirements. For example, in the 2025 proxy season, when the SEC Staff still undertook the role of concurring (or not) with exclusion requests, more than 378 no-action requests were submitted.[26] Finally, given technology and other changes since 1942, there may be many ways to improve the shareholder proposal process, which could be reflected in any Proposal Access provisions.
Proposal Access provisions likely would need to address many of the same topics set forth in the state law discussion above.[27] In order to ease administration, reduce litigation risk, and achieve greater certainty, these provisions could include objective criteria (e.g., significant ownership requirements) instead of subjective criteria (e.g., ordinary business exclusion). Examples of some of the objective criteria that Proposal Access provisions would likely need to address include:
- eligibility criteria, such as ownership thresholds, holding period requirements, and aggregation rules (i.e., whether and how many shareholders are permitted to aggregate ownership to meet ownership thresholds);
- the proper format for proposals, including whether Proposal Access will be limited to precatory (advisory) proposals;
- volume limitations on the number of proposals a shareholder may submit and/or the number of proposals that can appear in a company’s proxy materials; and
- resubmission thresholds or other limitations on frivolous and/or unpopular proposals that do not align with the interests of shareholders at large.
As noted above, simultaneous state law action would be necessary to help clarify the permissible scope of these and other objective criteria and to provide for greater efficiency and administrability across private ordering Proposal Access regimes.
Conclusion
As discussed above, repeal of SEC Rule 14a-8 would mean that state corporate laws will need to be quickly and appropriately revised to address this potential void, and company advisers and boards will need to consider how they will respond. Given the pace at which these developments are unfolding, the time for state legislatures, companies, and shareholders to engage proactively with these questions is now—before Rule 14a-8’s repeal forces potentially ill-conceived reactions that ultimately harm companies and investors alike.
1See Spring 2025 Unified Agenda of Regulatory and Deregulatory Actions, available at https://www.reginfo.gov/public/do/eAgendaMain?operation=OPERATION_GET_AGENCY_RULE_LIST¤tPub=true&agencyCode=&showStage=active&agencyCd=3235.(go back)
2Rule 14a-8’s requirements include eligibility and procedural requirements (e.g., ownership thresholds, timing requirements, one proposal limit, 500-word limit on proposal length) and substantive bases (e.g., subject matter limits, resubmission thresholds) for excluding proposals from a company’s proxy statement.(go back)
3See Chairman Paul S. Atkins, Keynote Address at the John L. Weinberg Center for Corporate Governance’s 25th Anniversary Gala (Oct. 9, 2025), available at https://www.sec.gov/newsroom/speeches-statements/atkins-10092025-keynote-address-john-l-weinberg-center-corporate-governances-25th-anniversary-gala.(go back)
4President Trump issued a December 11, 2025 Executive Order targeting proxy advisory firms and directing Chairman Atkins to consider revising or rescinding any rules, including Rule 14a-8, that are inconsistent with the order’s purpose. See The White House, Protecting American Investors from Foreign-Owned and Politically-Motivated Proxy Advisors (Dec. 11, 2025), available at https://www.whitehouse.gov/presidential-actions/2025/12/protecting-american-investors-from-foreign-owned-and-politically-motivated-proxy-advisors/.(go back)
5In a similar vein, the SEC has recently proposed to rescind the climate-related disclosure rules adopted in March 2024. See Rescission of Climate-Related Disclosure Rules, 91 FR 33296 (proposed June 3, 2026), available at https://www.federalregister.gov/documents/2026/06/03/2026-11091/rescission-of-climate-related-disclosure-rules. (go back)
6This article uses the term “Proposal Access” to refer to the adoption of corporate governance provisions, whether in the form of governance policies and guidelines or bylaw provisions, that would give shareholders the ability to include proposals and supporting statements in a company’s proxy materials (“Proposal Access”).(go back)
7See, e.g., Delaware General Corporation Law (the “DGCL”) Section 211(b) (“Any other proper business may be transacted at the annual meeting.”).(go back)
8See Hearings on H.R. 1498, H.R. 1821, and H.R. 2019, Before the House Committee on Interstate and Foreign Commerce, 78th Cong., 1st Sess., pt. 2, at 174-75 (1943) (Statement of Chairman Purcell) (“Once a shareholder could address a meeting[;] today he can only address the assembled proxies which are lying at the head of the table. The only opportunity that the stockholder has of expressing his judgment comes at the time when he considers the execution of the proxy form, and we believe . . . that that is the time he should have the full information before him and the ability to take action as he sees fit.”).(go back)
9In Medical Committee for Human Rights v. SEC, the Court noted that “the paucity of applicable state law giving content to the concept of ‘proper subject’ led the [SEC] to seek guidance from precedent existing in jurisdictions which had a highly developed commercial and corporate law and to develop its own ‘common law’ relating to proper subjects for shareholder action.” 432 F.2d 659, 677 (D.C. Cir. 1970), vacated, 404 U.S. 403 (1972). See also Hearings on Problems in Enforcing the Securities Laws Before a Subcommittee of the Senate Committee on Banking and Currency, 85th Cong., 1st Sess. 117-118 (1957) (“In the absence of a State statute establishing that a proposal is a proper subject for stockholder action, the Commission will rely on the common law if this can be ascertained. It will also consider other sources such as the corporate laws of other States, particularly of the leading commercial States, as well as the decisions of the Federal courts, textbooks, law journals and other similar material where the question may be discussed.”).(go back)
10As Rule 14a-8 has increasingly contained provisions that are not reflected in state corporate laws, it has become unclear whether and to what extent Rule 14a-8 preempts state law.(go back)
11Other criticisms include: the related company and management time and costs that all shareholders bear; that many publicly traded companies are large, complex, international entities with a variety of operations and strategies that are not appropriately subject to a shareholder referendum; technological advancements creating the possibility of additional (and potentially creative) paths for shareholders to advocate for their views besides voting on shareholder proposals; and the need for a process that allows for certainty and efficient resolution of any issues, and minimizes the potential litigation risks.(go back)
12For further information, please see our client alert, SEC Staff Issues Statement Revising Its Role in the Shareholder Proposal Process for the 2026 Proxy Season (Nov. 18, 2025), available at https://www.gibsondunn.com/sec-staff-issues-statement-revising-its-role-in-the-shareholder-proposal-process-for-2026-proxy-season/.(go back)
13See Statement Regarding the Division of Corporation Finance’s Role in the Exchange Act Rule 14a-8 Process for the Current Proxy Season (Nov. 17, 2025), available at https://www.sec.gov/newsroom/speeches-statements/statement-regarding-division-corporation-finances-role-exchange-act-rule-14a-8-process-current-proxy-season. While the guidance applies until September 30, 2026, the Staff has not suggested that it will change this “no-review” position for the 2027 proxy season.(go back)
14See, e.g., analysis by Glass, Lewis & Co., Tracking Shareholder Proposals and Company Exclusions: Mid-Season Observations (June 8, 2026), available at https://corpgov.law.harvard.edu/2026/06/08/tracking-shareholder-proposals-and-company-exclusions-mid-season-observations-2/.(go back)
15Discretionary voting authority arises from language on a company’s proxy card that authorizes the company’s proxyholders “to vote on the proposals identified on the reverse side of this Proxy Card and in their discretion upon such other matters as may be properly presented at the meeting” (emphasis added).(go back)
16See Exchange Act Release No. 34-93596 (Nov. 17, 2021), available at https://www.sec.gov/files/rules/final/2021/34-93596.pdf. As part of the universal proxy rule amendments, the SEC amended Rule 14a-4(d) to allow anyone to solicit votes for or against a company’s director candidates without the consent of those directors, which previously was not permissible. The amendment to Rule 14a-4(d) also means that dissidents can actively solicit proxies to vote against company director nominees in a “vote no” campaign.(go back)
17For example, in 2024, AFL-CIO and United Mine Workers of America submitted five non-binding shareholder proposals under Warrior Met Coal, Inc.’s advance notice bylaws instead of under Rule 14a-8. Because the proponents satisfied the conditions of Rule 14a-4(c)(2) by filing their own proxy materials, including their own proxy card, and sending their proxy materials to shareholders owning at least 50% of the company’s stock (the minimum percentage required to carry the proposals), the company was effectively forced to include all the Floor Proposals in its proxy materials in order to be able to use proxies solicited from shareholders to vote on the Floor Proposals.(go back)
18During the 2025 proxy season, proposals from the top 10 proponents accounted for a substantial majority of the more than 802 proposals submitted.(go back)
19 For example, provisions addressing whether precatory proposals are proper subjects for shareholder action or the permissible subject matter for shareholder proposals may be addressed through state corporate laws or, to the extent permissible under state corporate law, through company governance documents or both. Similarly, limitations in one area may affect approaches to other aspects of these issues.(go back)
20Precatory proposals only request, but do not require, action. For a discussion and analysis concluding that there is no inherent right under Delaware law for shareholders to bring precatory proposals, see Kyle A. Pinder, “The Non-Binding Bind: Reframing Precatory Stockholder Proposals Under Delaware Law,” Michigan Business & Entrepreneurial Law Review, Volume 15, Issue 1 (2026), available at https://repository.law.umich.edu/mbelr/vol15/iss1/2. See also Atkins, supra note 3.(go back)
21If Delaware does not swiftly address these issues, it could contribute to DExit given the criticisms of many Delaware companies (and their largest investors) of the Rule 14a-8 shareholder proposal regime. (DExit refers to the trend of companies moving their state of incorporation from Delaware to other states like Texas and Nevada.)(go back)
22In reaching its conclusion, the Court distinguished between bylaws that regulate procedure and those that regulate substantive decisions, holding that binding proposals to adopt procedural bylaws are proper subjects. Other than AFSCME and Boilermakers Loc. 154 Ret. Fund v. Chevron Corp., 73 A.3d 934, 951 (Del. Ch. 2013), Delaware law has not provided guidance on what constitutes a process-oriented, as opposed to a substantive, bylaw. In Boilermakers, the Delaware Court of Chancery upheld the validity of a forum selection bylaw, noting that such a provision is process oriented because it regulates “where,” not “whether,” a shareholder may bring certain causes of action.(go back)
23 Outside of process-oriented bylaw amendments, director election, and director removal, it is unclear that shareholders have the right to submit binding proposals that direct the company or the board to take certain action without running afoul of DGCL Section 141(a), which vests the board with broad managerial authority.(go back)
24 See Pinder, supra note 20, at pp. 22-28.(go back)
25 Proxy access bylaws allow shareholders who meet certain criteria (typically, holding at least 3% of a company’s shares for a minimum of three years) to nominate their own director candidates for inclusion in a company’s proxy materials, without running a costly independent proxy solicitation. The SEC originally adopted a proxy access rule in 2010, but the rule was subsequently vacated in 2011 when the DC Circuit ruled that the SEC had violated the Administrative Procedure Act in adopting the rule by failing to adequately evaluate its economic effects. This decision led to a shift toward “private ordering,” whereby individual companies voluntarily adopted their own proxy access bylaws, often in response to shareholder pressure. As a result, the specific eligibility requirements, the number of nominees permitted, and procedural conditions vary by company and are set forth in each company’s bylaws.(go back)
26For an overview of shareholder proposal developments during the 2025 proxy season, please see our client alert, Shareholder Proposal Developments During The 2025 Proxy Season (Aug. 8, 2025), available at https://www.gibsondunn.com/shareholder-proposal-developments-during-the-2025-proxy-season/.(go back)
27In addition, advance notice bylaw requirements would apply to, and might need to be revised to address, proposals that are submitted under any Proposal Access regime.(go back)
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