Shadow SEC Statement No. 16: Retain Rule 14a-8
By John Coates, John C. Coffee, Jr., James D. Cox, Merritt B. Fox and Joel Seligman October 13, 2026
We oppose rescission of SEC Rule 14a-8.
Rule 14a-8 has for 80 years been a useful, congressionally authorized component of the U.S. capital markets, fully compatible with the long-standing dual state and federal system governing public companies. Reasonable people may disagree reasonably about whether the current version of Rule 14a-8 is perfectly calibrated to obtain the greatest net benefits. We do not agree that the Commission has come close to making the case that Rule 14a-8 does not provide any net benefits whatsoever, much less that wholesale repeal will provide more net benefits than either the status quo or reasonable alternatives to the current rule.
There are many policy reasons to oppose rescission. Most obviously, proposals under Rule 14a-8 have been approved by shareholders numerous times on topics core to corporate governance, such as majority-board election requirements and classified boards—persuasive evidence (not seriously discussed in the proposing release) of the value of allowing shareholders to communicate via proxy statements and votes on matters of common interest. Many other proposals have received enough supporting votes to signal to boards the need for attention to specific topics, and boards have responded to those signals. Many other proposals have received few positive votes, and have failed to receive more votes over time, providing feedback to sponsoring shareholders that proposals need to be refined, improved, or dropped.
Also important to any serious analysis would be an informed and good faith attempt to anticipate what would follow from rescission. We are confident that shareholders will not sit by silently as boards mismanage or misgovern their companies or rely on the “Wall Street rule” (of exit), especially given how many institutional investors are not permitted by their own commitments to sell. When, predictably, at least some companies are seen to be underperforming or engaged in poor decisions, shareholders will use alternative tools in lieu of Rule 14a-8 proposals. Those tools may well disrupt corporate governance far more than non-binding proposals submitted under Rule 14a-8. Proxy fights, coalitions with hedge fund activists, withhold-vote campaigns, negative votes on management proposals, shareholder-sponsored binding bylaw amendments, and lawsuits are among those tools. Say-on-pay votes will continue as they are mandated by statute. The current release almost entirely fails to treat these possibilities with the attention they deserve. We also note the SEC made a major change in how it implemented Rule 14a-8 just a year ago, and it does not adequately review facts about the effects of that change in its current rule proposal.
But the Commission’s own release presents policy reasons for repeal as secondary to its legal rationale. The Commission contends that Rule 14a-8 exceeds the Commission’s authority under Section 14(a) of the Securities Exchange Act of 1934 and improperly intrudes on a domain long reserved to the states. In the interest of brevity, the rest of this statement focuses on the SEC’s legal rationale, which provides an independent and sufficient basis for rejecting it.
That justification is wrong on its own terms. Rule 14a-8 does not create any substantive right enforceable under state corporate law, and it displaces nothing that state law otherwise governs. Proposals included under the rule are precatory; they bind no one, alter no charter, and effect no corporate action that state law does not already fully control. What the rule actually regulates is the content of a federal disclosure document—the company’s own proxy statement—a subject squarely within the Commission’s Section 14(a) authority since 1934. A shareholder has always been free to raise the identical resolution from the floor of a meeting; Rule 14a-8 only concerns whether that proposal may also appear in the company’s proxy materials. That is a question about the scope of a federal communications channel, not an intrusion into state corporate governance.[1] The fact that in-person attendance at meetings had ceased to be a meaningful way for shareholders to exercise voting rights was evident in 1934 and is not a change that can justify a rescission of a long-standing rule on any ground, much less legal authority.
The U.S. House Commerce Committee report accompanying the Securities and Exchange Act of 1934 responded to a proxy system described by critics as “a self-perpetuation and a self-approval device” for incumbent management, [2]and the companion Senate report complained that “[t]oo often proxies are solicited without explanation to the stockholder of the real nature of the questions for which authority to cast his vote is sought.”[3] The House report grounded the proxy provisions on the idea of “fair corporate suffrage”[4]—the notion that a shareholder’s formal voting right meant little in practice if the only practical mechanism for exercising it (the proxy) was controlled entirely by management, unconstrained by any disclosure or fairness requirement. The stated purpose of what became Section 14(a) was to give the Commission “power to control the conditions under which proxies may be solicited with a view to preventing the recurrence of abuses which have frustrated the free exercise of the voting rights of stockholders.”[5]One clear gap was the inability of many shareholders to communicate with each other about shareholder resolutions and other topics of interest, because as their numbers grew, their ability to do so at a state-law-mandated shareholder meeting had steadily diminished.
Rule 14a-8 addresses another gap in disclosure when (as customary) a corporation solicits the authority to vote shareholders’ shares on any matter that may arise at a shareholder meeting. If such requests are made with corporate knowledge that a shareholder intends to seek action on a proposal at the meeting, the corporation would need to communicate its position about the proposal as part of its proxy solicitation. Without that disclosure, the corporation risks material omission liability, and shareholders risk having their authority misused to vote on an uninformed basis. Rule 14a-8 governs that process with guardrails that protect companies and shareholders alike in the state-law based voting process.[6] The SEC’s proposing release does not adequately consider how this goal of the rule would be addressed in its absence.
Nothing about modern corporate governance has eliminated the need for shareholders to communicate with each other to instruct and oversee proxies or engage in informed governance with full disclosure—a core mandate of the securities laws. No statute bearing on that fundamental need has relevantly changed since Rule 14a-8 was adopted in 1942 to partly address the gaps emphasized by Congress. The Commission does not identify any statutory change of note, nor any case law casting meaningful doubt on the legality of Rule 14a-8.[7] To the contrary, more than a dozen decisions have held or presumed over the past 80 years that Rule 14a-8 or its predecessor was and remains authorized.[8] The SEC does nothing to address much less dismiss that contrary body of law,[9] or the plain language of the statute it purports to interpret. The SEC’s only attempt to invent a justification for its volte face is to stress the fact that proxy communications have “effectively” or “de facto” displaced resolutions made in person at shareholder meetings. But that fact was a logical result of and contemplated by the Securities Exchange Act of 1934 itself, and it has been a fact for decades. It is not a new fact that somehow justifies drastically re-interpreting the authority the statute gives the SEC. Proposals made under Rule 14a-8 continue to have only the legal effect given to them under state corporate law, and the Commission’s efforts to suggest otherwise are supported by no facts.
An agency that reverses an 80-year, consistently applied interpretation of its own authorizing statute without pointing to any intervening change in the law—whether statute or governing case law—mischaracterizing the practical effect of its own rule, has not offered the “reasoned explanation” the Administrative Procedure Act requires for changed agency positions.[10] The most basic element of legal reasoning is to consider opposed arguments and authorities. The same is true for “reasoning” under the APA. A final rule resting on the SEC’s current rationale would be vulnerable to vacatur as arbitrary and capricious.
The Commission may believe that Loper Bright Enterprises v. Raimondo[11] supports its position, since that decision holds that courts owe no deference to an agency’s interpretation of the statutes it administers. But Loper Bright cuts the other way. Its lesson is that an agency’s legal interpretation must now stand or fall on the merits of its reasoning, not on the agency’s say-so.[12] The interpretation offered in this release does not stand on its merits: It is thinly reasoned and unsupported by serious legal analysis, and it reads far more naturally as a restatement of the political commitments of the current single-party Commission than as an exercise of the Commission’s expertise in administering Section 14(a). Loper Bright confirms this proposal is entitled to zero deference from a reviewing court.
The Commission should withdraw the proposal.
ENDNOTES
[1] “Where … the Commission has prescribed a rule under its clear authority to regulate the proxy process, it cannot be said that “the [Commission]’s assertion of authority directly invades the ‘firmly established’ state jurisdiction over corporate governance and shareholder voting rights.” Interfaith Ctr. on Corp. Resp. v. SEC, 786 F. Supp. 3d 97, 135 (D.D.C. 2025) (quoting Bus. Roundtable v. Sec. & Exch. Comm’n, 905 F.2d 406, 413 (D.C. Cir. 1990) (quoting CTS Corp. v. Dynamics Corp. of Am., 481 U.S. 69, 89 (1987))).
[2] Sheldon E. Bernstein & Henry G. Fischer, The Regulation of the Solicitation of Proxies: Some Reflections on Corporate Democracy, 7 U. Chi. L. Rev. 226, 227 (1940). See also H.R. Rep. No. 1383, 73d Cong., 2d Sess., 13 (1934) (“Fair corporate suffrage is an important right that should be attached to every equity security bought on a public exchange,” and that management “should not be permitted to perpetrate themselves by the misuse of corporate proxies.”)
[3] S. Rep. No. 1455, 73d Cong. 2d Sess. 75 (1934).
[4] H.R.Rep. No. 1383, 73d Cong., 2d Sess., 13 (1934).
[5] Id. at 14.
[6] E.g., SEC v. Transamerica Corp., 67 F. Supp. 326 (D. Del. 1946) (requiring re-solicitation of proxies by company given its knowledge of planned shareholder proposals, upholding predecessor of Rule 14a-8), aff’d, 163 F.2d 511 (3d Cir. 1947); cf. New York City Emps. Ret. Sys. v. Am. Brands, Inc., 634 F. Supp. 1382, 1386 (S.D.N.Y. 1986) (stating that omission of a shareholder proposal from proxy materials in violation of Rule 14a-8 is “inherently misleading”).
[7] The SEC cites Santa Fe Industries, Inc. v. Green, 430 U.S. 462, 479 (1977) and Bus. Roundtable v. SEC, 905 F.2d 406, 410 (D.C. Cir. 1990). Neither addressed Rule 14a-8. Santa Fe limits its focus to areas “where established State policies of corporate regulation would be overridden.” Id. at 479. Few states have elaborated rules for when shareholder proposals may or must be included in company proxy statements, and nothing about Rule 14a-8 would override any state laws that are adopted to do so. Business Roundtable stresses a point that undercuts the SEC’s current legal position: “Proxy solicitations are, after all, only communications with potential absentee voters. The goal of federal proxy regulation was to improve those communications and thereby to enable proxy voters to control the corporation as effectively as they might have by attending a shareholder meeting.” 905 F.2d at 410 (emphasis in original).
[8] S See, e.g., Roosevelt v. E.I. du Pont de Nemours & Co., 958 F.2d 416, 422–23 (D.C. Cir. 1992) (“It is obvious to the point of banality . . . that Congress intended by its enactment of [S]ection 14 . . . to give true vitality to the concept of corporate democracy.”); Grimes v. Centerior Energy Corp., 909 F.2d 529 (D.C. Cir. 1990); Med. Comm. for Human Rts. v. SEC, 432 F.2d 659 (D.C. Cir. 1970), vacated as moot, 404 U.S. 403 (1972); AFSCME v. Am. Int’l Grp., Inc., 462 F.3d 121 (2d Cir. 2006); Trinity Wall St. v. Wal-Mart Stores, Inc., 792 F.3d 323 (3d Cir. 2015); SEC v. Transamerica Corp., 163 F.2d 511 (3d Cir. 1947); Dyer v. SEC, 266 F.2d 33 (8th Cir. 1959); As You Sow v. Chubb Ltd., No. CV 26-734 (SLS), 2026 WL 879666 (D.D.C. Mar. 31, 2026); Interfaith Ctr. on Corp. Resp. v. SEC, 786 F. Supp. 3d 97 (D.D.C. 2025); United Church Bd. for World Ministries v. SEC, 617 F. Supp. 837 (D.D.C. 1985); Lovenheim v. Iroquois Brands, Ltd., 618 F. Supp. 554 (D.D.C. 1985); SEC v. Transamerica Corp., 67 F. Supp. 326 (D. Del. 1946), aff’d, 163 F.2d 511 (3d Cir. 1947); Tosdal v. Nw. Corp., 440 F. Supp. 3d 1186 (D. Mont. 2020); Amalgamated Clothing & Textile Workers Union v. Wal-Mart Stores, Inc., 821 F. Supp. 877 (S.D.N.Y. 1993); N.Y. City Emps.’ Ret. Sys. v. Am. Brands, Inc., 634 F. Supp. 1382 (S.D.N.Y. 1986); Peck v. Greyhound Corp., 97 F. Supp. 679 (S.D.N.Y. 1951); KBR Inc. v. Chevedden, 776 F. Supp. 2d 415 (S.D. Tex. 2011); Apache Corp. v. N.Y.C. Emps.’ Ret. Sys., 621 F. Supp. 2d 444 (S.D. Tex. 2008); see also CA, Inc. v. AFSCME Emps. Pension Plan, 953 A.2d 227 (Del. 2008).
[9] Indeed, it cites only three court decisions and provides no reasons to reject the settled legal understandings reflected in any of those decisions, merely stating “the Commission disagrees.”
[10] See FCC v. Fox Television Stations, Inc., 556 U.S. 502, 529 (2009); Motor Vehicle Mfrs. Ass’n v. State Farm, 463 U.S. 29, 42 (1983).
[11] 144 S. Ct. 2244 (2024).
[12] See id. at 392 (explaining that under Section 706 of the APA, “it thus ‘remains the responsibility of the court to decide whether the law means what the agency says'” (quoting Perez v. Mortg. Bankers Ass’n, 575 U.S. 92, 109 (2015) (Scalia, J., concurring in judgment)).
This post comes to us from the Shadow SEC, whose members are professors John Coates at Harvard Law School, John C. Coffee, Jr. at Columbia Law School, James D. Cox at Duke University School of Law, Merritt B. Fox at Columbia Law School, and Joel Seligman at Washington University School of Law.