As I understand it, the SEC has been in the Rule 14a-8 no-action letter business since shortly after the rule was adopted in 1942, so we are entering truly uncharted territory. What will the SEC’s decision to retreat from its historical role as Rule 14a-8’s referee mean for public companies and shareholder proponents? Nobody knows for sure, but here’s my two cents on some of the potential implications:
Will we see more shareholder proposals excluded? Yes, but maybe not to the extent that some might expect. With the benefit of favorable recent guidance like SLB 14M and without the prospect of the Staff looking over their shoulder, companies may be inclined to take a more aggressive approach to excluding proposals than in years past. That being said, decisions to exclude proposals won’t be made in a vacuum.
Companies will need to consider how key investors or other constituencies may respond if they are perceived as acting too aggressively to “silence” shareholders. The facts and circumstances surrounding a particular proposal may also enter into the equation. For example, when dealing with proposals that have the backing of well-financed proponents but that aren’t likely to get much support (like anti-ESG proposals), companies may also decide that fighting their inclusion may not be worth the headaches associated with excluding them.
Will companies seek Corp Fin’s sign-off on exclusions? Corp Fin’s statement outlines a process by which companies can obtain some cold comfort from the Staff about their decision to exclude a proposal. Despite Commissioner Crenshaw’s characterization of this process as a “hall pass” permitting companies to exclude shareholder proposals, my guess is that companies may be hesitant to put themselves in the position of making the representation required to obtain this assurance unless the precedent they’re relying upon is bullet-proof. Some decisions might fall into that category, but if you’re dealing with a sophisticated proponent, you may not find a lot of bullet-proof precedent permitting you to exclude that shareholder’s proposal.
I think in many cases that don’t involve the proverbial “no brainer,” a company that excludes a proposal may opt to do so without going through this cold comfort process. I know I’d rather defend a good faith judgment about excludability after the fact than have to deal with a situation where an unqualified representation made to the SEC that “there’s nothing to see here” is being challenged.
Will we see more Rule 14a-8 litigation? From time-to-time, issuers have bypassed the no-action process and filed lawsuits seeking declaratory relief permitting them to exclude a proposal under Rule 14a-8. Will the SEC’s withdrawal from the playing field result in more suits like these? My guess is that we’re unlikely to see much of this kind of litigation. These lawsuits were filed to avoid the Rule 14a-8 no-action process, and there’s less reason to pursue this strategy if that process is unavailable. Of course, it’s still available in the case of precatory proposals sought to be excluded under Rule 14(a)(8)(i)(1), so I suppose a company that may not be able to provide the kind of opinion the Staff is looking for to exclude that proposal through the no-action process might consider litigation as an alternative.
What about proponents – will they take companies to court to force inclusion? That seems unlikely in most cases not involving well-financed activist hedge funds (who typically aren’t big users of Rule 14a-8 anyway) and some deep-pocketed members of the anti-ESG crowd. For the most part, the shareholder proposal process has given gadflies & NGOs with limited funding the ability to get proposals on corporate proxy cards relatively inexpensively, and many of those proponents simply don’t have the financial resources to litigate a company’s decision to exclude a proposal.
Will we see more unorthodox strategies from proponents? I think that’s a sure thing. To quote from Virgil’s Aeneid, “If I cannot move heaven, I will raise hell.” With the Rule 14a-8 process substantially crimped, it seems inevitable that shareholder proponents will turn to alternative ways of getting their messages across.
In the case of sophisticated investors, these might include withhold vote campaigns targeted at chairs of board committees responsible for areas of concern to a proponent. (John Chevedden recently did this at Microsoft after it excluded his proposal). Withhold vote campaigns may be conducted as exempt solicitations, but perhaps we’ll also finally see a few inexpensive “nominal solication” campaigns under the universal proxy rules. We may even see a rise in innovative Rule 14a-8 workarounds, like the “zero slate” campaign first waged by the United Mine Workers in 2024.
Now also might be a good time to dust off your copies of Saul Alinsky’s Rules for Radicals, because companies should probably prepare for a little old fashioned “hell raising.” Along those lines, proponents who feel that they were denied a voice through the Rule 14a-8 process may be inclined to deliver their message through floor proposals at shareholders’ meetings, or through protests at or other disruptions of those meetings or other investor events. I’d also be on the lookout for increased use of social media campaigns targeting company policies and board members.
I’m sure there are a dozen other potential implications of Corp Fin’s decision that I haven’t addressed, including the biggest question of all – is this the beginning of the end for shareholder proposals?
Well, maybe. While we hopefully won’t be dealing with the fallout from another shutdown, the SEC’s staffing constraints are unlikely to improve much over the course of the next several years, so it wouldn’t surprise me at all if its withdrawal from the no-action process extends beyond 2026. Moreover, if the precatory proposals citadel falls, there isn’t going to be a whole lot left to fight about.
On the other hand, in the immortal words of Sideshow Bob, “You can’t keep the Democrats out of the White House forever!” So, whatever happens over the course of the next few years, we’re unlikely to let our Shareholder Proposals Handbook go out of print.
Meredith just hosted a terrific new Timely Takes Podcast featuring Davis Polk’s Ning Chiu and ExxonMobil’s David Kern on ExxonMobil’s new retail investor voting program. During this 33-minute podcast, Ning and David discussed:
– What led ExxonMobil to create this program and seek no-action relief from the SEC
– The basics of the program, focused on the aspects that were critical to the no-action relief
– The process of getting the program up & running
– Interest in the program and feedback received so far
– Maintaining the program and how investors opt in and out
– The process each year during proxy season
– What other companies should think through if considering a similar program
As always, if you have insights on a securities law, capital markets or corporate governance issue, trend or development that you’d like to share in a podcast, we’d love to hear from you. You can email me and/or Meredith at john@thecorporatecounsel.net or mervine@ccrcorp.com.
According to PwC’s 2025 Annual Corporate Directors Survey, a majority of the public company directors surveyed would like to see at least one of their colleagues voted off the island. This excerpt notes that this sentiment is on the rise, and suggests some of the reasons that may be behind it:
Frustration in the boardroom is mounting, and directors are increasingly acknowledging it. This year’s survey reveals discontent with peer performance is at a record high: 55% of public company directors surveyed believe that at least one of their board colleagues should be replaced, up six percentage points from last year.
This suggests that directors are becoming more candid about underperformance among their peers. It may also reflect a greater understanding that directors are looking for more from each other in today’s dynamic business environment. Indeed, the most common concern fueling this point of view is a lack of meaningful contribution to board discussions.
The survey found 41% of directors who want a colleague to leave said that it was because that person didn’t contribute meaningfully to discussions. When asked to elaborate, those directors’ comments reflected “a broader concern about alignment, engagement and boardroom dynamics.”
Director tenure appears to play a big part in this, with PwC observing that in many cases, directors believe that long tenure may result in diminished performance. Bolstering that conclusion was the fact that 34% of directors who wanted to replace a board member also cited long-tenured directors as contributing to board underperformance.
While we’re on the topic of director deadwood, a recent Heidrick & Struggles report highlights the benefits of approaching board refreshment as a strategic discipline. As this excerpt points out, increasing the board’s ability to keep activists at bay is not the least of the benefits associated with a proactive approach to board refreshment:
While being assured of the quality of your leaders for today and tomorrow is the primary reason to prioritize board refreshment, doing so also helps reduce exposure to costly and time-consuming activist campaigns.
So far in 2025, 43% of activist campaigns have targeted board seats, according to one recent report. Though activists have been relatively quiet amid economic uncertainty, many are preparing for a surge in the months ahead. Companies, in turn, are quietly hiring advisers to prepare defenses.
It is important to note that even though public proxy fights are becoming less common, negotiations are still disruptive and expensive. Boards that have failed to demonstrate board refreshment discipline are more vulnerable to activist critique and less able to credibly defend their position.
The report goes on to observe that with research finding that more than 75% of institutional investors see activists as catalysts for change and more than 70% see them as catalysts for accountability, boards that fail to take the intiative when it comes to refreshment “may find their refreshment agenda shaped for them—by others.”
Rounding out “Board Governance Day” on TheCorporateCounsel.net Blog, be sure to check out our recent “Timely Takes Podcast” featuring my discussion with governance expert Ralph Ward. In this 26-minute podcast, Ralph and I discussed the following topics:
– Qualities that separate good boards from not-so-good boards
– Preparing boards to address emerging governance issues
– Effective communication between boards and management
– Keys to good board and committee meetings
– The role and dangers of AI tools in the boardroom
– Advice for prospective directors on their due diligence
– Improving interactions between the board and its advisors
– Preparing for unexpected crises
– Some boardroom “hacks” to keep in mind
As always, if you have insights on a securities law, capital markets or corporate governance issue, trend or development that you’d like to share in a podcast, we’d love to hear from you. You can email me and/or Meredith at john@thecorporatecounsel.net or mervine@ccrcorp.com.
Please indulge me with one last government shutdown blog this week.
The Corp Fin Staff was back to work yesterday following an end to the government shutdown on Wednesday, and they did not waste any time putting out new guidance on how they will process filings now that the government shutdown has ended. Those issuers who filed a Securities Act registration statement without a delaying amendment or filed an amendment to remove the delaying amendment got some welcome relief, with the Staff essentially saying that they would not stand in the way of allowing those registration statements to become effective after 20 days had passed pursuant to Section 8(a) of the Securities Act and Rule 459 thereunder. In the prior shutdown guidance, Corp Fin had indicated that the Staff may ask companies to amend a registration statement to include the delaying amendment following an end to the government shutdown.
1. Registration Statements Without a Delaying Amendment. The Division indicates that if a company removed a delaying amendment or filed a new registration statement without a delaying amendment while the Division’s operating status was closed during the government shutdown, the company does not need to amend the registration statement to add a delaying amendment now that the Division’s operating status has changed to open following the end of the government shutdown. Similar to the guidance that the Division issued at the commencement of the government shutdown, the post-shutdown guidance notes that the liability and antifraud provisions of the federal securities laws apply to all registration statements, including those that go effective pursuant to Section 8(a) of the Securities Act, and the Division cautions that the company and its representatives should ensure that the registration statement does not contain any material misstatements or omissions of material information required to be stated therein or necessary to make the statements therein not misleading. In a change from the guidance issued on October 1, 2025 (as updated on October 9, 2025), the post-shutdown guidance no longer indicates that the Staff may ask companies to amend a registration statement to include the delaying amendment.
2. Continuation of Rule 430A Guidance. The Division reiterates the Rule 430A guidance that it provided on October 9, 2025, noting that “the Staff will not recommend enforcement action to the Commission if a company omitted the information specified in Rule 430A from the form of prospectus filed as part of a registration statement during the shutdown and such registration statement goes effective after the shutdown by operation of law pursuant to Section 8(a) of the Securities Act and Rule 459 thereunder.”
3. Acceleration Requests. Consistent with the prior guidance, the post-shutdown guidance notes that the Staff will consider requests to accelerate the effective date of registration statements for which the delaying amendment was omitted, or that were amended to remove the delaying amendment, if such registration statements are amended to include a delaying amendment prior to the end of the 20-day period “and acceleration pursuant to Rule 461 is appropriate.”
4. Pending Post-Effective Amendments. The guidance notes that, for any post-effective amendments to registration statements that were filed during the time when the Division’s operational status was closed, the Staff will declare those post-effective amendments effective, unless the Staff hears from that company indicating that it does not want the post-effective amendment to be declared effective until a later time. Companies are encouraged to reach out to their assigned industry office as soon as possible if they want to delay the effective date of a pending post-effective amendment.
5. Pending Preliminary Proxy or Information Statements. The guidance indicates that those companies with pending preliminary proxy or information statements can file their definitive proxy or information statement once the 10-calendar-day period has expired; however, the Division notes that if the Staff had indicated that it would review the filing prior to the shutdown, the Staff will continue its review of the filing now that the Division’s operational status is open.
6. Pending Exchange Act Registration Statements. The guidance indicates that pending Form 10 registration statements filed to register a class of securities under Section 12(g) of the Exchange Act will go automatically effective after 60 calendar days, and the Staff reminds companies that they will be subject to the current and periodic reporting requirements of the Exchange Act once the Form 10 goes automatically effective. The Staff notes that it may review subsequent periodic reports filed by the company under the Exchange Act.
7. Filing Reviews. The post-shutdown guidance notes that if the Staff had indicated that it was not reviewing a pending registration statement prior to the government shutdown, the company many now submit an acceleration request when ready. For those situations where a filing was under review before the government shutdown, the Staff will continue to review those filings in the order that they were received. With respect to those registration statements that included delaying amendments and were filed during the government shutdown, the Staff will process those filings in the order that they were received. This same approach applies to draft registration statements that were submitted during the government shutdown.
Corp Fin’s post-shutdown guidance does not address other types of SEC submissions that require Staff action, such as no-action or interpretive requests, but as I mentioned earlier in the week, I expect that the Staff will respond to such requests in the order in which they were received.
I would also note that those companies that are seeking to list securities on an exchange in connection with, e.g., an IPO, should work with the exchange to determine whether they are going to permit the listing when a Securities Act registration statement goes effective by lapse of time pursuant to Section 8(a) of the Securities Act. As I noted earlier this week, the exchanges are likely to revert back to their pre-shutdown approach to IPO issuers seeking to list on the exchanges, in that they will expect issuers to resolve all Staff comments before approving a listing.
Earlier this week, Chairman Atkins delivered a speech at the Federal Reserve Bank of Philadelphia where he provided more details on the SEC’s “Project Crypto.” He offered these core principles underlying Project Crypto:
Before I walk through how I view the securities laws as applied to crypto tokens and transactions, let me state two basic principles that guide my thinking.
First, that a stock is still a stock whether it is a paper certificate, an entry in a DTCC account, or represented by a token on a public blockchain. A bond does not stop being a bond because its payment streams are tracked using smart contracts. Securities, however represented, remain securities. That is the easy part.
Second, that economic reality trumps labels. Calling something a “token” or an “NFT” does not exempt it from the current securities laws if it in substance represents a claim on the profits of an enterprise and is offered with the sorts of promises based on the essential efforts of others. Conversely, the fact that a token was once a part of a capital-raising transaction does not magically convert that token into a stock of an operating company.
These principles are hardly novel. They are embedded in the Supreme Court’s repeated insistence that we look to the “substance” of a transaction, not its “form,” when deciding whether the securities laws apply. What is new is the scale and speed at which asset types evolve in these new markets. This pace requires us to be nimble in response to market participants’ urgent requests for guidance.
Chairman Atkins noted that, in the coming months, he hopes that the Commission will consider “a package of exemptions to create a tailored offering regime for crypto assets that are part of or subject to an investment contract.”
This week, I have been celebrating 50 years of The Corporate Counsel and all of the related publications by showcasing some of my favorite contributions to the newsletter over the years.
When I started working for Executive Press after leaving the SEC in May 2007, I was very excited to join the editorial staff of The Corporate Counsel newsletter, given my long history with the publication that I described in the blog this week. Up until this point in my career, I had never really had the unique experience of writing for a blog or a newsletter, having instead cut my teeth on writing legal memoranda and disclosure in SEC filings. The thing that I soon learned about blogs and newsletters is that they very much have a “voice,” and if you are writing for them, you need to adapt your writing style to that voice. While this may sound straightforward, I found it hard to adapt my writing style to the more casual, conversational approach that is associated with these publications. I greatly appreciate the patience and understanding of Mike Gettelman, Broc Romanek and Julie Hoffman, who successfully guided me to the “voice” of our publications that carries through to this day.
For today’s featured article from The Corporate Counsel, I highlight one that is less practical and more personal. Even though this piece does not really include any practical guidance, I definitely find myself referring back to it from time to time. In the July-August 2020 issue of The Corporate Counsel, I penned a tribute to my late friend Marty Dunn, who had been a big part of The Corporate Counsel family for almost a decade. I still have a very distinct memory of when I asked Marty to join me as an editor of The Corporate Counsel, and he was so excited to get a chance to collaborate with me and contribute to an iconic publication that he had also relied on for many years. We announced Marty’s arrival in the May-June 2011 issue of The Corporate Counsel, and over the course of his tenure Marty and I had a very healthy competition trying to come up with the most practical guidance in our contributions, and I have to say looking back that Marty usually won on that front! My tribute to Marty is as follows:
In Memoriam: Marty Dunn
We lost a securities law legend when Marty Dunn passed away on June 15, 2020. Marty was the most recognizable person in the securities bar, having spoken at so many conferences and events for so long that it is impossible to count them all. Marty was also a key contributor to our publications, serving as an Editor of The Corporate Counsel for the past nine years, as a co-host of “The Dave & Marty Radio Show” on TheCorporateCounsel.net and as a panelist, comedian and puppeteer at the annual Proxy Disclosure Conference. Marty loved the securities laws and spent his life sharing that love with others, always seeking to teach us something new, while at the same time making sure that we did not take it all too seriously.
Marty’s wit and good humor was legendary. He always had a funny story or witty retort when speaking on an otherwise dry panel, and audiences loved him for that. For many years, Marty and I would travel around the country, like a pair of securities law troubadours, bringing the Dave and Marty show to conferences and events. Although, I must admit, it was mostly the Marty show. We had such a great time on those trips. I will treasure those memories forever.
Marty had spent nearly 20 years at the SEC, where he was responsible for many of the SEC’s most significant initiatives on disclosure, governance and capital-raising, including, among many others, reforming the securities offering process, implementing the Sarbanes-Oxley Act, adopting plain English requirements, implementing electronic proxy delivery and easing capital formation for small businesses. Marty spent his entire government career in his beloved Division of Corporation Finance, where he held several key positions, including Associate Director, Chief Counsel, Deputy Director and Acting Director.
Marty truly loved the SEC and Corp Fin. I can distinctly recall sitting in his office, drafting some new rule, interpretation or regulatory relief, and Marty would say, with a mix of amazement and admiration, “We just made that up!” Marty was the best at taking something complex and making it understandable, as well as taking on the most difficult problem and finding a practical solution for it. These skills made him the great teacher, mentor, regulator and counselor that he was.
After leaving the government, Marty was in private practice at O’Melveny & Myers and Morrison & Foerster. Clients and colleagues sought Marty out for his wise counsel and his aforementioned ability to solve difficult problems with practical solutions. I had the pleasure of working with Marty again for the past seven years, and we were able to accomplish so much together, but yet we had so much more that we wanted to do. I am going to miss him as a valued friend, mentor and colleague.
Above all else, Marty was a family man. He loved his family so much, and he talked about them all the time. Marty is survived by his wife Linda and daughters Emily, Molly and Maggie, as well as many other family members, friends, colleagues and clients who loved him.
I hope you have enjoyed my celebration of 50 years of The Corporate Counsel, and if you are not a subscriber to The Corporate Counsel and The Corporate Executive newsletters, be sure to sign up today. Please email info@ccrcorp.com or call 1.800.737.1271 to subscribe.
Overnight, the House passed a measure restoring federal government funding, and the President signed that legislation soon thereafter, making 43 days the new high water mark for federal government shutdowns. As of early this morning, the SEC’s website was updated to remove a notice indicating that the agency was shut down due to a lapse in appropriations, but no guidance has been provided as of yet regarding the agency’s reopening. As of my writing of this blog, it is unclear whether the furloughed SEC Staff will be returning to work today or tomorrow.
UPDATE: Since I wrote the blog very early this morning, NBC4 Washington has reported that the Office of Personal Management sent the following notice last night to federal workers in the Washington, DC area: “Employees are expected to begin the workday on time. Normal operating procedures are in effect.”
As the political parties crank their spin machines up to full blast to try to convince us who “won” this government shutdown, the one thing for certain is that we the U.S. taxpayers all lost. Holding the federal government hostage for a month and a half in the end appeared to accomplish very little, but yet it disrupted the lives of many Americans who are just trying to go about their lives with little regard for political machinations in Washington, DC. I am afraid that we have become too numb to these government shutdown shenanigans, and that does not bode well for our future – particularly given that we could face the same fate as soon as the end of January!
For the SEC, the shutdown could not have come at a worse time. The SEC Staff, already demoralized as a result of DOGE cuts, early retirements and a return-to-office directive, was forced to sit on the sidelines with no paychecks for nearly a month and a half. As a result of the shutdown, critical rulemaking initiatives that have been outlined by Chairman Atkins ground to a halt and momentum was lost. Now that the government has reopened, the Staff will have to dedicate scarce resources to working through a backlog of filings and requests. I know that the Staff is up for the challenge, but it is unfortunate that they have to face this challenge at all.
Yesterday, the WSJ reported that the proxy advisory firms Institutional Shareholder Services and Glass Lewis are being investigated by the FTC for potential violations of antitrust laws. The article notes:
The probe, which is in its early stages, is focused on the firms’ competitive practices and how they steer clients on hot-button issues such as climate- and social-related shareholder proposals, people familiar with the matter said. The FTC told Glass Lewis it was investigating whether it and others may have engaged in “unfair methods of competition,” according to a letter sent in late September that was reviewed by The Wall Street Journal.
The FTC probe follows an antitrust review launched by the Republican-led House Judiciary Committee this spring.
“This non-public investigation does not mean the Commission is suggesting Glass Lewis has acted unlawfully. With complete confidence in our longstanding commitment to high ethical standards, Glass Lewis is fully cooperating with the FTC’s document request,” a Glass Lewis spokeswoman said in a statement.
An ISS spokesman declined to comment.
Earlier this week, the WSJ reported that the White House is considering an executive order that would seek to restrict certain activities of ISS, Glass Lewis and the largest institutional investors. That article notes:
Trump administration officials are discussing at least one executive order that would restrict proxy-advisory firms such as Institutional Shareholder Services and Glass Lewis, people familiar with the matter said. That could include a broad ban on shareholder recommendations or an order blocking recommendations on companies that have engaged proxy advisers for consulting work, the people said.
Officials also are exploring limits on how index-fund managers are allowed to vote, seeking to curtail the power of such behemoths as BlackRock, Vanguard Group and State Street, the people said. These three together own on behalf of clients roughly 30% or more of many of the biggest U.S. publicly traded companies. One measure being discussed would require these index-fund managers to mirror their votes in line with clients who choose to vote.
We will be monitoring to see where all of this goes, because these measures could radically change the landscape for public companies.
