Shareholder Proposals

At the annual stockholder meeting, directors ask stockholders to vote on certain matters, including the election of directors and other matters, like the ratification of the board's selection of a corporate auditor. But, directors do not have exclusive control over the agenda at a stockholder meeting. Stockholders also have the right to put proposals and questions before the meeting. Some matters that are proposed by stockholders, including amendments to bylaws are expressly permitted by the state corporate law. Others are governed by bylaws, for example stockholder nomination of candidates for the position of director.

For publicly-traded corporations, the process by which a stockholder can get access to the company's proxy statement to put a question before the shareholders at a meeting is governed by SEC regulation. The SEC's 14a-8 rules have been developed to govern when a board is required to put a shareholder proposal on the corporate proxy statement, or to be more precise rules governing when a board is permitted to exclude a shareholder proposal from the corporation's proxy materials sent to stockholders.

Although many shareholder proposals are focused on traditional corporate governance issues, there is a long history of social activists, especially faith-based groups like the Interfaith Center on Corporate Responsibility, using the shareholder proposal process to put important social issues on the agendas of corporate America. For example, during the 1970s, shareholders used the shareholder proposal process to raise questions about corporate support for the war in Vietnam. In the 1980s, the anti-Apartheid movement used the shareholder proposal process to raise awareness of the evils of Apartheid in South Africa. In more recent years, social activists on both the left and the right have used the 14a-8 process in order to surface various social issues.

The most common vehicle for shareholder activism under Rule 14a-8 is the precatory proposal. A precartory proposal is a non-binding shareholder resolution that requests or recommends that the board take a particular action, but does not legally compel it to do so. Because such proposals are not formally binding on the board, they have historically occupied a somewhat uneasy place in corporate governance: influential as a signaling mechanism and a source of reputational pressure, but without direct legal force. The SEC's Staff has long played a gatekeeping role in this space, issuing "no-action" letters indicating whether it would recommend enforcement action if a company excluded a particular proposal under one of the enumerated bases in Rule 14a-8(i), such as the "ordinary business" exclusion under 14a-8(i)(7) or the "relevance" exclusion under 14a-8(i)(5).

During the second Trump administration, the SEC has significantly shifted its posture toward ESG-related and other social-policy precatory proposals. The SEC has shown considerably greater willingness to grant no-action relief to companies seeking to exclude proposals touching on environmental, social, and governance matters. Indeed since 2025, initially citing staffing cuts due to DOGE, the SEC no longer issues "no-action" letters for anything other than requests to exclude shareholder proposals because they are not proper under state law (14a-8(i)(1). In Febraury 2025, the SEC rescinded SLB 14L, which had been issued during the Biden administration and had made it substantially harder for companies to exclude ESG-related proposals under the ordinary business exception by requiring Staff to focus on whether a proposal raised issues of "significant social policy" rather than deferring to the board's judgment about core business operations. The practical effect of these reversals has been to make it easier for boards to keep contested social and political proposals off the proxy statement entirely.

In the Fall of 2025, SEC Chair Paul Atkins suggested in a speech that Delaware amend its corporate law to make precatory proposal illegal under state law. More broadly, the SEC has signalled that it intends on issuing new rules under 14a-8 that wll significantly cut back on the ability of shareholders to use the corporate proxy to present questions to fellow shareholders. Overall, this shift reflects a broader ideological reorientation away from the view that the shareholder proposal process is an appropriate forum for advancing stakeholder-oriented or ESG agendas.