Shareholders Push Companies to Help Retain Proxy Proposal Rights
Drew Hutchinson, Oct 2nd
While the SEC pursues an end to mandatory votes on corporate shareholder proposals, investor advocates are pushing companies themselves to step in and help preserve existing rights.
The burgeoning pressure on companies ranging from Microsoft Corp. to Oracle Corp. comes as the Securities and Exchange Commission seeks to repeal an 84-year-old regulation compelling companies to hold annual votes on shareholder resolutions. States will have the option to fill a regulatory gap if the rule goes through, but in the meantime, stockholders are going straight to the source.
Independent shareholder advocate James McRitchie wrote to Costco Wholesale Corp. last week asking the company to oppose the SEC’s plans in public comments, according to an email seen by Bloomberg Law.
Similarly, investment firm Zevin Asset Management contacted its 30 portfolio companies mid-September urging them to speak out publicly against the proposal, express concerns to the agency’s commissioners, and maintain the status quo, according to sustainable investing director Marcela Pinilla. Meanwhile, the New York State and New York City comptrollers’ offices also called on every publicly traded company to keep accepting the proposals.
Other campaigns began earlier. Noting SEC leaders’ increasing condemnation of the proposal process, the National Legal and Policy Center’s shareholder arm submitted resolutions earlier in the year at a half-dozen companies. One was withdrawn after Microsoft agreed in August to keep accepting proposals that meet existing stock ownership requirements for one year, regardless of what the agency does. Two similar proposals will see a vote Oct. 13 at Procter & Gamble Co. and Nov. 18 at Oracle.
Shareholder proposals can address anything from board practices to diversity, equity, and inclusion. Companies saw an increase in environmental and social justice proposals in the early 2020s following the death of George Floyd, but that trend has since dropped off. In the 2026 proxy season, governance proposals — which ask for measures like independent board directors or certain shareholder rights — were king.
Shareholders see Rule 14a-8, the regulation in question, as a civil, productive way to put key issues in front of companies. Hedge funds have the clout to call up CEOs, but smaller proponents rely on the rule for access, said Paul Chesser, director of the NLPC’s Corporate Integrity Project.
“There’s relatively few of us,” he said. “They don’t have to deal with a lot.”
Divergence Likely
Chesser’s organization has holdings in a couple dozen more companies where it could submit proposals before next spring’s proxy season, when most large companies hold their annual meetings. Future resolutions would probably focus on preserving more aspects of the current federal rule, not just the minimum stock ownership requirements it pursued at Microsoft and Oracle, he said.
Whether companies will embrace shareholders’ pleas for action is up in the air. After asking Costco to submit comments to the SEC opposing the rollback, McRitchie received a response from the company’s general counsel, John Sullivan, according to an email seen by Bloomberg Law: “Thanks for the feedback. We are evaluating the SEC proposal and your comments.”
“The near term is just going to be a lot of issuers taking different paths,” said Brent Trame, partner at Thompson Coburn LLP.
Ultimately, companies will probably keep including at least some shareholder proposals if the existing rule vanishes, said Frank Zarb, partner at Proskauer Rose LLP.
Companies already got a taste of the shareholder proposal process without the SEC. The agency decided last November to stop settling disputes between shareholders and companies about which proposals were required to go to a vote — a policy it said it will continue until further notice. Some businesses operated during the 2026 proxy season as they had in every other year, while others seemed more comfortable excluding resolutions, said Timothy Smith, senior policy adviser at shareholder group Interfaith Center on Corporate Responsibility. It will be the same disparity if Rule 14a-8 disappears, he said.
States Take Spotlight
The SEC views state legislatures and courts as the proper venues to handle shareholder proposal rules, an agency spokesperson said in a recent press briefing.
What states do will also dictate how companies function going forward. Some states could create a mandatory shareholder proposal process, while others could let companies opt in — in which case some would and others wouldn’t, said Benjamin Edwards, a law professor at the University of Nevada, Las Vegas.
Two-thirds of Fortune 500 companies are incorporated in Delaware. But SEC Chairman Paul Atkins has questioned whether the state’s laws guarantee the right to non-binding shareholder proposals, and even invited companies before last proxy season to get a Delaware legal opinion stating so. No one took him up on it.
Delaware’s Corporate Law Council, which advises the general assembly on business code updates, has been studying and deliberating the implications of threats to Rule 14a-8 for months, Secretary of State Charuni Patibanda-Sanchez said in an emailed statement.
“Given Delaware’s expertise in corporate governance, we are the best jurisdiction able to propose a solution that meets the needs of the market,” she said.
The best shareholder proposal framework for companies is sort of like wine, Edwards said: “What is a better fit for one company and their situation may not be a better fit for another.”