On September 16, the Securities and Exchange Commission proposed to rescind Rule 14a-8, the SEC rule that lets a shareholder holding as little as $2,000 of stock place a proposal in a company’s proxy statement, at the company’s expense, for a vote of all shareholders. The stated reason for the proposed rescission is that Congress never gave the Commission the power to adopt the rule,[1] a remarkable admission about a rule the agency has kept on the books for more than 80 years. Comments are due November 20.
Objections have already come from the left, right, and center. The Council of Institutional Investors calls the proposal “a solution in search of a problem.” Faith-based and environmental proponents call it “an attack on the fundamental rights of shareholders” and a “loss for the free market” more broadly. Conservative proponents object just as loudly; one accuses the SEC of proposing “to lock in left-wing shareholder activist gains.” It is not often that the Council of Institutional Investors and the National Center for Public Policy Research agree on anything. All predict the same result: Without the federal rule, few shareholder proposals will ever reach a vote.
That’s probably true, but not necessarily. Rescission ends a federal subsidy: the free space the rule commandeered in a company’s proxy statement. But the right the rule subsidized comes from state corporate law, and that right will survive the rescission of the rule. Whether shareholders ever use it depends on whether they and the companies they own value it.
In Delaware, where most large public companies are incorporated, a shareholder may raise a proposal at the annual meeting, subject to any advance-notice requirements in the company’s bylaws. Whether that right extends to nonbinding resolutions, which nearly all shareholder proposals are,[2] is a question Delaware courts have never squarely decided.[3] After rescission, Delaware will answer that question, not the SEC.[4]
The Legal Case for Rescission
The Commission’s legal argument is straightforward: The statute the rule rests on, Section 14(a) of the Securities Exchange Act of 1934, lets the SEC regulate how proxies are solicited, not what shareholders vote on. And it certainly says nothing about shareholder proposals. So, the Commission concludes, it never had the power to adopt Rule 14a-8.
The SEC’s reading of the statute has ample support, including a 2010 amendment to the Exchange Act that the Commission never cites. When Congress amended Section 14(a) in 2010, it explicitly authorized the SEC to require companies to include shareholders’ board nominees in their proxy materials,[5] and in the same law it required a say-on-pay vote.[6] Congress knew how to require something in a public company’s proxy materials.[7] But it never expressly authorized nonbinding shareholder proposals.
In defense of Rule 14a-8, one might be tempted to argue that Congress has known about the rule for decades, has referred to the practice in later statutes,[8] and has left it alone, reflecting congressional acquiescence in, if not endorsement of, the rule. But the U.S. Supreme Court has warned that reading that kind of intent into legislative inaction is “at best treacherous,”[9] and that a regulation’s “age is no antidote to clear inconsistency with a statute.”[10]
The Policy Case for Rescission
Separate from the legal question, the rule’s recent record supports the policy case for its repeal. In 2025, the typical proposal that reached a vote drew 14 percent support.[11] No environmental proposal won a majority in 2025 or 2026, and anti-ESG proposals did worse still. After an animal-rights group sued, PepsiCo agreed to carry a proposal on the treatment of bulls in its supply chain; shareholders gave it under 9 percent support. By the SEC Chairman’s count, a single individual was the sole or lead proponent of about 41 percent of the proposals voted on this past proxy season. That is one shareholder deciding what millions of other investors are asked to vote on. From 2022 through 2025, companies asked the SEC staff for permission to exclude more than 1,000 proposals,[12] under a no-action process that shifted with each change of administration and that the SEC staff abandoned entirely in August. A rule that compels hundreds of corporate referenda a year on proposals that shareholders routinely reject, administered by an agency that has stopped administering it, is hard to justify. Indeed, the Commission offers its own policy reasons as a separate ground for rescission, one that could sustain repeal even if a court rejected the Commission’s legal argument.[13]
Reasonable minds can differ over what is lost if Rule 14a-8 is repealed. The rule has occasionally produced real and lasting governance reforms: Board declassification, majority voting for directors, and proxy access itself all spread through shareholder proposals. The shareholders who would lose the most are individual investors, who filed about half of last year’s proposals.[14] The Commission admits as much.[15] But none of that could save the rule if the SEC never had the legal authority to adopt it.
Private Ordering After Rescission
What comes next is up to companies and their shareholders. The SEC’s shareholder proposal rule has long deferred to state corporate law on whether a proposal is a proper subject for shareholder action, so a company could have restricted proposals through its bylaws long ago. Almost none did,[16] presumably because no board wanted to be the first accused of silencing its shareholders. Once the rule is gone, the same bylaw power can be used to provide access instead of restricting it. A company whose shareholders value proposal access can grant it in its bylaws, on terms of its own choosing: ownership thresholds, holding periods, limits on subject matter and number. Investors can price the differences.
Proxy access shows what such contracting can look like. After a federal court vacated the SEC’s proxy access rule in 2011,[17] companies adopted proxy access bylaws one at a time, investors converged on a market standard of 3 percent held for three years, and by 2019 three quarters of the S&P 500 had proxy access without any federal rule requiring it. Access for shareholder proposals may follow the same path, though I doubt it will, at least not quickly. Proxy access spread through shareholder proposals, the very method that rescission of Rule 14a-8 would effectively close. And the other methods that remain open to shareholders, engagement with boards and the annual election of directors, work more slowly. But if companies and their investors value what the federal rule provided, nothing after rescission prevents them from restoring it in whatever form they please.
In the wake of the SEC’s move, the New York State Comptroller has already asked companies to commit to accepting proposals voluntarily. And a politically conservative proponent has asked Procter & Gamble, Oracle, Microsoft, and other companies to adopt policies preserving the current eligibility thresholds whatever the SEC does. Procter & Gamble’s board opposes the request as “premature.” Microsoft has already agreed to keep the current thresholds, at least through its 2027 annual meeting.
Despite all the signals pointing toward rescission—including the SEC Chairman’s call in October 2025 to re-evaluate the rule’s “fundamental premise” and an executive order in December 2025 directing the agency to consider rescinding it[18]—shareholder advocates spent the last year quarreling over how the SEC administers the rule. They are about to fight the wrong battle again, this time over the SEC’s legal authority for the rule.
That question may take years to resolve in court. The terms of proposal access can be settled sooner, company by company, in corporate bylaws. If investors value nonbinding shareholder proposals, they need not wait for a court to save the federal rule. They can ask for the right from the companies they own. Whether they bother to will tell us much about what the rule was worth.
ENDNOTES
[1] Rescission of Rule 14a-8’s Federal Regulation of Shareholder Proposals and Amendments to Rule 14a-4, Exchange Act Release No. 106,383, 91 Fed. Reg. 59,904, 59,906 (proposed Sept. 21, 2026) [hereinafter Release] (“we propose to rescind Rule 14a-8 in its entirety because the rule exceeds the Commission’s statutory authority under section 14(a)”).
[2] Jay B. Sykes, Cong. Rsch. Serv., R48855, The Shareholder Proposal Rule 29 (2026) (“According to some estimates, precatory proposals constitute roughly 98% of proposals submitted in a typical proxy season.”).
[3] See Release, supra note 1, at 59,914 (“[N]o commentator has identified any controlling authority from a Delaware court on this issue”); Mohsen Manesh, The Corporate Contract & the Private Ordering of Shareholder Proposals, 50 J. Corp. L. 1, 29 & n.203 (2024) (noting that “to the extent that right is recognized by case law, judicial references to it are scant and fleeting”); see also Kyle A. Pinder, The Non-Binding Bind: Reframing Precatory Stockholder Proposals Under Delaware Law, 15 Mich. Bus. & Entrepreneurial L. Rev. 1 (2026) (concluding that Delaware law provides no inherent right to make precatory proposals).
[4] The same release would also make it easier for companies to vote the proxies they hold against proposals raised that way. See Release, supra note 1, at 59,922–23 (proposing to amend Rule 14a-4(c)); id. at 59,923 (explaining that, without the amendment, proponents could “effectively obtain inclusion of their proposals on the company’s proxy card at the company’s expense, even if Rule 14a-8 is rescinded”).
[5] 15 U.S.C. § 78n(a)(2) (2024) (rules “may include . . . a requirement that a solicitation of proxy . . . by (or on behalf of) an issuer include a nominee submitted by a shareholder to serve on the board of directors of the issuer”); see also Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, § 971(b), 124 Stat. 1376, 1915 (2010) (codified at 15 U.S.C. § 78n note) (“The Commission may issue rules permitting the use by a shareholder of proxy solicitation materials supplied by an issuer of securities for the purpose of nominating individuals to membership on the board of directors of the issuer . . . .”).
[6] 15 U.S.C. § 78n-1(a)(1) (2024) (a proxy “shall include a separate resolution subject to shareholder vote to approve the compensation of executives”).
[7] Cf. Cent. Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164, 176 (1994) (“Congress knew how to impose aiding and abetting liability when it chose to do so.”).
[8] See 15 U.S.C. § 78n-1(c)(4) (2024) (The say-on-pay vote “may not be construed . . . to restrict or limit the ability of shareholders to make proposals for inclusion in proxy materials related to executive compensation….”); National Securities Markets Improvement Act of 1996, Pub. L. No. 104-290, § 510(b)(1), 110 Stat. 3416, 3450 (directing an SEC study of “shareholder access to proxy statements pursuant to section 14”). Neither statute grants the Commission authority for the rule.
[9] Girouard v. United States, 328 U.S. 61, 69 (1946) (“It is at best treacherous to find in congressional silence alone the adoption of a controlling rule of law.”).
[10] Brown v. Gardner, 513 U.S. 115, 122 (1994); see also id. at 121 (“[W]here the law is plain, subsequent reenactment does not constitute an adoption of a previous administrative construction.” (quoting Demarest v. Manspeaker, 498 U.S. 184, 190 (1991))).
[11] Release, supra note 1, at 59,930–31 (reporting median support of 14 percent for proposals voted on in 2025).
[12] Id. at 59,917 n.160 (“During the 2022–2025 period, companies submitted 1,073 no-action requests to the Commission to exclude shareholder proposals….”).
[13] Id. at 59,906 (“Even if the rule or aspects of it were within the Commission’s statutory authority, there are independent policy reasons to rescind Rule 14a-8 in its entirety.”); id. at 59,913.
[14] Id. at 59,930–31 (estimating that 53 percent of 2025 proposals were submitted by individual proponents).
[15] Id. at 59,946–47 (“The proposed rescission of Rule 14a-8 would disproportionately affect less well-resourced proponents, including individual retail investors and smaller advocacy groups . . . .”); see also id. at 59,941.
[16] See id. at 59,917 (noting that the Commission is “not aware of any companies that have incorporated their own framework for addressing shareholder proposals into their governing documents”); id. at 59,917 n.162 (noting “a small number of companies” that opted into a new Texas statute).
[17] Bus. Roundtable v. SEC, 647 F.3d 1144 (D.C. Cir. 2011) (vacating Rule 14a-11).
[18] Exec. Order No. 14,366, 90 Fed. Reg. 58,503 (Dec. 16, 2025) (directing that “the SEC Chairman shall consider revising or rescinding all rules . . . relating to shareholder proposals, including Rule 14a-8”).
Mohsen Manesh is the L.L. Stewart Professor of Business Law at the University of Oregon School of Law. He is the author of “The Corporate Contract and the Private Ordering of Shareholder Proposals.