Last week, SEC Chairman Paul Atkins spoke at the Society for Corporate Governance National Conference, and he outlined the SEC’s efforts to address the decline public companies in the United States. In his remarks, he noted:

Presented with a 40 percent decline in public companies over the past few decades, we are summoned not to create more complexity nor reinvent our mandate, but to restore it to its foundation: that is, disclosure of material information.

Years of accretive rulemakings—some eliciting immaterial information—have produced reams of paperwork that can do more to obscure than to illuminate. As Justice Thurgood Marshall once warned, “Some information is of such dubious significance that insistence on its disclosure may accomplish more harm than good. Bury[ing]…shareholders in an avalanche of trivial information [is] a result that is hardly conducive to informed decision[]making.”

As investors struggle to parse and understand—or choose to simply ignore—today’s lengthy annual reports and proxy statements, companies also incur substantial costs to prepare those documents. These costs are financial, of course, but temporal no less—composed not only of fees for armies of specialized lawyers, accountants, and consultants, but also the opportunity costs resulting from significant use of boards’ and management’s time.

In light of this current state of the SEC’s public company disclosure regime, one of my top priorities as Chairman is to restore the regime to one rooted in materiality—a fundamental concept that Congress weaved throughout the federal securities laws. Unfortunately, over the past several years, this term has been hijacked or substituted with phrases such as “double materiality” or “decision useful.” But these purported standards have no standing in the relevant jurisprudence.

Chairman Atkins went on to note that a number of comment letters on Regulation S-K suggested a “materiality overlay” that would be applicable throughout Regulation S-K, stating:

My chief aim of revising Regulation S-K is for these rules to elicit material information, without overly prescriptive line-item requirements that frequently elicit immaterial information. However, even with the best intentions and execution, the Commission may be unable to ensure that information called for by every line item will be material to investors of every public company. Additionally, disclosures mandated by prescriptive requirements that appear material today may become immaterial over time as corporate structures and business practices develop and change.

Because of these concerns, the “materiality overlay,” as suggested by commenters, may be helpful to creating a principles-based disclosure regime that represents the “minimum effective dose of regulation” and elicits material information based on the facts and circumstances of each company. Meanwhile, market forces would drive disclosure of other information that may be desired by the company’s investors. This already occurs to some extent today when companies provide non-GAAP financial measures and key performance indicators tailored to their business and their investors’ expectations.

Of course, a “materiality overlay” will reduce immaterial disclosures in filings only if companies use the discretion afforded to them and omit information called for by a line-item. Likewise, any amendments to Regulation S-K that replace prescriptive rules with principles-based rules will require companies to exercise judgement for the amendments to be effective. If companies are unwilling to do so, no disclosure regime can achieve the goal of providing material information to investors, without burying them in trivial information, as Justice Marshall warned.

Chairman Atkins also addressed shareholder proposals, noting that the decision of the Division of Corporation Finance to not issue no-action responses during the 2025-2026 proxy season “was akin to removing the training wheels from the shareholder proposal bicycle.” He noted:

Over the years, companies and shareholder proponents have grown all too comfortable leaning on that support simply because it was there—not because they needed it. As it turns out, both can pedal just fine on their own.

As he discussed the Commission’s efforts to look at Rule 14a-8, he repeated a statement from one of his own speeches back in 2008: “[W]e must be vigilant that the shareholder proposal process does not result in the tyranny of the minority.”

– Dave Lynn