Why Would the SEC Silence Shareholders?

By Steven M. Rothstein and Peter Flaherty
Feb. 24, 2026

The original article was posted on WSJ.

Markets work best when businesses are guided by owners.

We head nonprofit organizations concerned with corporate governance and policy and are often on opposite sides of important issues. But we agree on this: When shareholders’ voices are silenced, our capital markets lose accountability. The system becomes more political, not less.

Paul Atkins, chairman of the Securities and Exchange Commission, recently suggested that the shareholder proposal process be shut down. He would do this by deferring to state law to determine whether nonbinding shareholder proposals are a “proper subject” for inclusion in proxy materials—stepping back from the SEC’s longstanding role as referee between companies and proponents. Since it is impractical for activists to sue under state law every time a proposal is filed, Mr. Atkins would essentially hand the decision over to management.

He says he wants to reduce regulatory disclosures, but shareholder proposals aren’t disclosures imposed by regulators. They are communications initiated by shareholders, the company’s owners, directed at fellow shareholders.

Mr. Atkins contradicts his own past statements. In a 2003 address, during an earlier term as a commissioner, he affirmed that “stockholders own the corporation.” That principle hasn’t changed. What has changed is the political climate. Politics rather than the underlying logic of ownership increasingly dictates how certain issues are framed and who has the power to speak.

On issues like diversity, equity and inclusion, shareholders routinely file proposals on opposite sides: Some urge companies to expand DEI initiatives, while others call for their reduction or elimination. Closing the process doesn’t remove politics from markets; it prevents owners from resolving policy disagreements through market mechanisms.

Shareholder proposals aren’t mandates or regulations. They are tightly constrained requests—limited to 500 words—that allow owners to place an issue before fellow shareholders for a vote. Even when proposals receive majority support, companies aren’t legally required to act. What they are required to do is listen.

For decades, shareholder proposals and the SEC’s adjudication process over whether a company may exclude a proponent’s resolution—known as a “no-action relief” decision—have been a feature of U.S. capital markets, supporting governance and long-term risk management. The SEC Division of Corporation Finance has already stopped responding to most no-action requests. This marks a break from that role and—as Caroline Crenshaw, who stepped down as an SEC commissioner last month, warned—threatens shareholder democracy. Critics say shareholder proposals are excessive or misused, but the system includes safeguards that allow companies to exclude proposals that are irrelevant, duplicative, vague or improper.

Markets work best without political interference and without government-imposed silence—when businesses are guided by their owners, not by regulators deciding which voices count.

Mr. Rothstein is chief program officer of Ceres. Mr. Flaherty is chairman of the National Legal and Policy Center.