SEC’s Stance on Shareholder Proposals Drawing Mixed Reviews

Last November, the Securities and Exchange Commission essentially told companies they would be on their own when it comes to decisions about excluding shareholder proposals from their proxy statements. The new approach is receiving a mixed reaction at best in practice.

As a refresher: The SEC’s Division of Corporation Finance, commonly known as CorpFin, announced on November 17, 2025, that it intended to stop issuing substantive responses to most requests to weigh in on shareholder proposals under Rule 14a-8 during proxy season. Companies had long relied on informal guidance from the agency in the form of so-called “no-action letters” when they decided to exclude the proposals from proxy ballots. However, the new policy maintains that companies must determine on their own if they have a “reasonable basis” for excluding shareholder proposals. (It does include some limited exceptions for matters of state law.)

The consensus among corporate governance professionals was that the SEC’s policy change would primarily affect ESG proposals – those pertaining to environmental, social and governance issues – and counterproposals from shareholders seeking to neutralize ESG’s impact on corporate policies. Organizations such as the Interfaith Center on Corporate Responsibility and the Shareholder Rights Group have taken strong exception to the SEC’s new policy.

The case could be made that the SEC’s new stance on no-action requests to exclude shareholder proposals could ultimately put proposals on proxy ballots that would not have survived the former exclusion process. The Walt Disney Company, for example, had previously filed no-action requests on three shareholder proposals it is including in this year’s proxy statement. Similarly, an anti-ESG proposal made its way onto the proxy statement of Costco, even though the retail chain submitted a no-action request for the measure in September.

Such developments suggest that without the certainty provided by no-action letters, the SEC’s policy may have made life more difficult for corporate boards of directors. There is growing concern that disputes between major investors and corporations over proposal exclusions will end up in court. In a letter to SEC Chair Paul Atkins, the Council of Institutional Investors noted that companies excluding shareholder proposals under the new process “could lead to special scrutiny of those corporate boards.” That would include vote-no campaigns and litigation.

“Thus, rather than alleviating pressure on corporate boards, the Statement could result in greater board-level instability through unnecessarily increasing issuers reputational or legal risks,” the CII stated.

The SEC itself recently received a favorable ruling in a legal challenge from investors regarding the agency’s ability to amend Rule 14a-8. That does nothing to assuage newfound fears of litigation risks in corporate America, but it may embolden the agency to commit even more strongly to its policy on shareholder proposals. The real question to watch as this proxy season rolls on: Will companies get frustrated with the uncertainty produced by the SEC’s retreat on no-action letters, or will they embrace greater autonomy to quash the measures at their discretion?

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