First adopted in 1942, US Securities and Exchange Commission Rule 14a-8 allows eligible shareholders to submit proposals for inclusion in a company’s proxy statement and ballot for consideration at annual shareholder meetings. While Rule 14a-8 was intended to promote shareholder participation and accountability, it has also become a tool for activist investors pursuing environmental, social, political, and corporate governance objectives.

With the SEC likely to commence a process to amend or repeal Rule 14a-8 later this year, in the interim we expect the SEC staff will continue its position announced in November 2025 of not providing no-action relief to companies receiving shareholder proposals on most issues.

Heading into the 2027 proxy season, this legal update explains the rule’s operation, alternative activist strategies (including zero‑slate campaigns), corporate defenses, litigation trends, and the potential consequences if Rule 14a‑8 is amended or repealed.

OPERATION OF THE RULE

How Rule 14a-8 Works

Rule 14a-8 establishes a process through which qualifying shareholders may submit proposals to be included in a company’s proxy materials. Rather than bearing the cost of distributing their own solicitation materials, eligible shareholders can have their proposals presented alongside management’s proxy materials sent to all shareholders. To qualify, generally shareholders must have continuously held a specified amount of company securities (as little as $2,000) for a designated period before submitting a proposal. The proposal itself is subject to detailed limitations and procedural requirements, including deadlines for submission and documentation proving ownership.

Most shareholder proposals are precatory rather than binding, meaning they express shareholder preferences without legally compelling management action. Precatory proposals are governed by both Rule 14a-8 and state corporate law. Rule 14a-8 sets forth the procedural requirements for exclusion, but state law determines whether a proposal is “proper” for action by shareholders in the first place. If a proposal is improper under state law, Rule 14a-8(i)(1) permits companies to exclude such proposals from their proxy statements. While the determination of whether a proposal is “proper” is solely governed by state law, the accompanying note to Rule 14a-8(i)(1) states that the SEC staff “will assume that a proposal drafted as a recommendation or suggestion is proper unless the company demonstrates otherwise.”

Once a proposal is submitted, the company must decide whether it will include the proposal in its proxy statement or seek to exclude it. In addition to being improper under state law, Rule 14a-8(i) contains various other bases for exclusion. For example, some of the more frequently cited grounds for exclusion include:

• violates state, federal, or foreign law;
• concerns ordinary business operations rather than significant policy issues;
• is materially false or misleading;
• has already been substantially implemented;
• duplicates another proposal;
• conflicts with a company proposal; or
• addresses matters beyond the company’s authority.

When a company determines to exclude a proposal, Rule 14a-8 requires it to notify both the SEC and the proponent and provide its basis for exclusion. Historically, companies phrased their grounds for exclusion in the notice as a “no-action request” to the SEC staff. If the SEC staff agreed that exclusion was permissible, it issued a “no-action letter” indicating that it would not recommend enforcement action to the SEC commissioners if the company omitted the proposal. If the SEC staff disagreed, most companies typically included the shareholder proposal in the company’s proxy materials.

In November 2025, the SEC staff announced that it would suspend the no-action letter process involving most grounds for exclusion, except for no-action requests to exclude a proposal under Rule 14a-8(i)(1) (proposals improper under state law). While companies under the new policy are still required to notify the staff and proponent of the decision to exclude a proposal, the SEC staff will only provide acknowledgment of the company’s exclusion decision and will not issue any substantive determination on the merits of the company’s position. As discussed below, this SEC staff policy shift has left companies to proceed without staff concurrence and increases the likelihood of court challenges by proponents.

How Activists Use Rule 14a-8

Activist investors have for many years used Rule 14a-8 as a low-cost method of influencing corporate behavior. Because the company bears the expense of distributing proxy materials, activists can reach all shareholders without mounting a costly proxy contest while advancing objectives that may not align with shareholder value maximization.

One common use of the rule involves governance reforms. Activists have submitted proposals seeking independent board chairs, majority voting standards for directors, proxy access rights, enhanced disclosure, and executive compensation reforms. Certain governance practices that are now commonplace emerged in part through years of shareholder proposal campaigns, all without the need for further SEC rulemaking or other formal changes to state or federal law.

Environmental and social activists also use Rule 14a-8 to advance ESG objectives. Proposals may request climate-risk disclosures, greenhouse-gas reduction targets, diversity initiatives, human-rights assessments, political spending transparency, or reports regarding supply-chain practices.

Activists frequently pursue strategic goals beyond winning a shareholder vote. A proposal can attract media attention, pressure management during labor negotiations, influence institutional investors, impact customers of the business, or serve as a catalyst for broader campaigns. In some cases, proponents withdraw proposals after reaching agreements with management, making the proposal process a tool for private engagement as much as shareholder voting.

Once a proposal becomes the subject of a proxy solicitation campaign, both management and proponents may engage in extensive communications with investors. These communications are generally subject to the SEC’s proxy solicitation rules and antifraud provisions. Companies may protest to the SEC or sue activists for allegedly false or misleading statements made during proxy campaigns. Likewise, activists may challenge company communications that they believe mischaracterize their proposals or contain inaccurate information. Because federal securities laws broadly prohibit materially false or misleading statements in connection with proxy solicitations, both sides must exercise caution when communicating with shareholders.

How Companies Can Defend Against Misuse

Companies concerned about misuse of Rule 14a-8 have several legitimate and lawful means of response. Effective defenses generally focus on procedural compliance, careful use of the rule’s exclusion mechanisms, and shareholder engagement.

First, companies should rigorously review shareholder proposals for compliance with Rule 14a-8’s procedural requirements. Many proposals contain technical defects related to ownership verification, submission deadlines, or other conditions of the rule. When deficiencies exist, companies may notify proponents and, where permitted, seek exclusion if deficiencies are not cured.

Additionally, companies can utilize the rule’s substantive exclusion provisions. The ordinary-business exclusion remains a particularly important defense against proposals that seek to micromanage day-to-day operations. Companies may also invoke exclusions for substantial implementation, duplication, conflicts with management proposals, or other permitted grounds under Rule 14a-8(i) when appropriate.

Further, proactive shareholder engagement can reduce the likelihood of contentious proposal campaigns. Companies that maintain regular communication with major investors often identify concerns before they evolve into formal proposals. After a proposal is received, constructive engagement may result in negotiated withdrawals of shareholder proposals or mutually acceptable compromises.

Finally, boards should maintain strong governance practices and transparent disclosures. Companies with credible governance structures and responsive investor-relations programs are often better positioned to persuade shareholders at large that activist proposals are unnecessary or misguided.

INCREASED LITIGATION

Litigation Risks Associated with Rule 14a-8

When a company excludes a proposal, the shareholder proponent may challenge the exclusion in federal court. Similarly, a company may seek a declaratory judgment from a federal court that exclusion is proper, although some courts have dismissed such suits on procedural grounds. Prior to the shift in the SEC staff policy on responding to no-action letters, such litigation was rare. But the SEC staff’s November 2025 announcement that it had suspended the no-action letter process for most shareholder proposals led to an increase in exclusion litigation during the 2026 proxy season, which may repeat in 2027.

Litigation often centers on whether the company properly relied upon one of the rule’s exclusion provisions, such as the ordinary-business exclusion, the substantial-implementation exclusion, or the argument that the proposal is materially misleading. Courts may be asked to determine whether the proposal addresses matters of significant social policy, whether management has already implemented the proposal’s objectives, or whether the proposal improperly intrudes into day-to-day business operations. Questions may also arise regarding the validity of shareholder proposals under the company’s governing documents, state corporation statutes, or fiduciary duty principles. Because annual meeting timelines are often compressed, courts are often asked to resolve disputes on an expedited basis, typically through motions for preliminary injunction, which increases litigation pressure on all parties.

Rule 14a-8 can also be used as part of broader activist strategies that incorporate litigation as a pressure tactic. Activists may threaten legal action to encourage companies to negotiate, withdraw exclusion requests, or adopt requested reforms voluntarily. Even if the likelihood of ultimate success is uncertain, the prospect of litigation can create reputational risks and management distractions that increase pressure on companies.

ZERO-SLATE CAMPAIGNS

How Zero-Slate Campaigns Operate

In recent years, issue-focused shareholder activism has expanded beyond traditional proxy contests regarding director elections and Rule 14a-8 shareholder proposals with the emergence of the “zero-slate” campaign, a strategy in which activist investors solicit votes on floor proposals, often to influence corporate governance, without nominating director candidates. Although the term does not appear in SEC rules, it has gained prominence following the SEC’s 2022 universal proxy rules, which require all duly nominated director candidates to appear on a single proxy card, allowing shareholders to mix and match director nominees. During the 2026 proxy season, some activists added the threat of launching a zero-slate campaign during discussions with management in response to the SEC staff’s new position on granting no-action relief under Rule 14a-8.

In a zero-slate campaign, the activist distributes its own proxy materials and seeks voting authority from shareholders. The activist will ask investors to support one or more proposals introduced under applicable corporate law or company bylaws—often known as a floor proposal. Rule 14a-8’s one-proposal rule and 500-word limit do not apply. The activist also includes the company’s full director slate in its proxy materials without conducting their own solicitation for director nominees by relying on the universal proxy amendments to Rule 14a-4(d), which permit the solicitation of votes for director nominees without the nominees’ consent. In fact, in prior zero-slate campaigns, the activists did not solicit votes for directors so that under Rule 14a-4(c)(2) they needed only to solicit the number of shares necessary to carry their proposal, which is usually a majority of votes cast (rather than 67 percent as required under Rule 14a-19 for solicitations for the election of directors).

In a traditional proxy contest, management presents a slate of director nominees and the activist presents a competing slate, either for some or all board seats. Under a zero-slate campaign, however, the activist’s slate consists of no nominees of its own at all. Instead of seeking board representation, the activist focuses on persuading shareholders to support a particular proposal, often reflecting a governance reform or policy objective. The campaign may involve soliciting proxies, communicating with investors, and encouraging votes on specific matters while allowing management’s director nominees to stand unchallenged.

Zero-slate campaigns are increasingly emerging when activists are unable to achieve their objectives through the shareholder proposal process established under SEC Rule 14a-8. For example, a company may seek to exclude a shareholder proposal from its proxy materials under one of the procedural or substantive grounds for exclusion. Rather than abandoning the issue, the activist may threaten to pursue an independent solicitation campaign. Moreover, Rule 14a-8 limits a proponent to a single shareholder proposal each year at each company in which it invests. An activist conducting a zero-slate campaign faces no such limit and could submit numerous proposals subject only to limitations imposed in corporate bylaws.

Including the company’s full director slate on the proponents’ proxy card could increase the likelihood that shareholders would use that card to vote because the activist’s proxy card will include a greater number of proposals to vote on the company’s proxy card. As a result, a company may feel compelled to include the shareholder proposals in its own proxy materials to encourage shareholders to use the company’s proxy card. Doing so avoids the risk that the proponent’s proxy card would be submitted in lieu of the company’s, enabling the company to monitor quorum and more efficiently solicit votes against the activists’ proposals.

Why Activists Consider Zero-Slate Campaigns

Activists are attracted to zero-slate campaigns for several reasons. First, the strategy is often significantly less expensive than a traditional proxy contest. Recruiting, vetting, and supporting director nominees can require substantial financial and organizational resources. By avoiding separate board nominations altogether, activists can devote their efforts to communicating their message to shareholders.

Second, zero-slate campaigns allow activists to maintain focus on a particular issue or issues. Whether the objective involves environmental disclosure, corporate governance reforms, executive compensation practices, political spending transparency, or other matters, the campaign centers on the substance of the proposal rather than on the qualifications of competing director candidates.

Third, the strategy can create leverage in negotiations with management. Activists are increasingly using the threat of launching a campaign to intensify discussions with management. Even if an activist does not expect to win a formal vote, the prospect of a public campaign may encourage management to engage in discussions or voluntarily adopt some of the requested reforms. In this sense, the campaign can serve as both a public advocacy effort and a bargaining tool.

Finally, because the activist does not seek board seats, the campaign may be viewed by some shareholders as less disruptive than a traditional proxy fight. Investors who are reluctant to support a change in board composition may nevertheless be willing to support a specific policy initiative.

Corporate Responses and Defenses

Companies have several tools available to respond to zero-slate campaigns. One important defense is the careful drafting and enforcement of advance-notice bylaws and meeting procedures. These provisions can help ensure that shareholder proposals and meeting-floor actions comply with established requirements. Companies may also scrutinize activist solicitations for compliance with SEC proxy rules. If proxy materials contain misleading statements, omissions, or procedural defects, management can challenge those materials at the SEC or in federal court.

Another important strategy is shareholder engagement. Companies that maintain strong relationships with institutional investors and other major shareholders are often better positioned to explain management’s perspective and counter activist arguments. Effective communication can help shareholders evaluate the merits of a campaign and determine whether the proposed changes serve the corporation’s long-term interests. Organizations that proactively address shareholder concerns may reduce the likelihood that activists gain significant support for zero-slate campaigns in the first place.

REPEAL OF RULE 14A-8

Consequences of Repealing Rule 14a-8

Recent media reports and statements by senior SEC officials indicate the SEC may pursue amendments to or an outright repeal of Rule 14a-8 via notice-and-comment rulemaking. This process typically takes the better part of a year, so the 2027 proxy season would likely not be directly impacted. Instead, we anticipate that 2027 will play out in much the same way as 2026: because the rulemaking will not be complete in time for the 2027 season, it stands to reason that the SEC staff will continue its new policy of not granting no-action relief under most grounds for exclusion under Rule 14a-8, and Chairman Atkins spoke favorably of the new policy in a July 9 speech.

If the SEC were to repeal Rule 14a-8 entirely, the consequences may extend beyond the shareholder proposal process itself. For example, such a repeal could alter relations between corporate management and activist shareholders, reshape activist strategies, reduce corporate costs, and initiate new legal and political debate regarding the future of shareholder rights in the United States.

Alternative Activist Strategies

The most immediate effect of repealing Rule 14a-8 would be the elimination of shareholders’ ability to require companies to include proposals in corporate proxy statements. As noted above, under the current system, qualifying shareholders can place proposals before all shareholders at relatively little cost because the company bears the expense of distributing proxy materials. Without Rule 14a-8, shareholder activists would lose this inexpensive option.

Although repeal would eliminate shareholder proposals under Rule 14a-8, it would not eliminate shareholder activism. Activists would likely adapt by pursuing alternative strategies. One possibility would be an increase in independent proxy solicitations, including zero-slate campaigns. Rather than relying on company proxy materials, activists could distribute their own materials and seek support directly from investors. While more expensive, such campaigns would remain available to well-funded organizations.

Another likely development would be increased use of director-election contests. Activists seeking governance changes might conclude that if they must bear the cost of a solicitation campaign, it is more effective to seek board representation directly rather than merely advocate for advisory proposals.

Additionally, activists could place greater emphasis on public pressure campaigns, customer boycotts, litigation, social media outreach, and direct engagement with institutional investors. The use of floor proposals, in which activists introduce new business directly at the annual meeting, could also increase. Rather than disappearing, activism may evolve into forms that are potentially more confrontational and more costly for all parties involved.

A repeal of Rule 14a-8 could also increase litigation in other areas. Activists who can no longer use Rule 14a-8 might turn more frequently to derivative lawsuits, books-and-records demands, fiduciary-duty claims, and other litigation strategies to influence corporate behavior.

Increased Importance of Institutional Investors

The repeal of Rule 14a-8 would likely enhance the influence of large institutional investors. Without a formal proposal process, activists seeking change would increasingly focus on persuading major institutions such as asset managers, pension funds, family offices, and sovereign wealth funds. These institutions would become even more important gatekeepers of corporate governance reform. As a result, the practical ability to influence corporate behavior might become concentrated in the hands of a relatively small number of large investors.

Voluntary Shareholder Proposal Programs

A repeal of Rule 14a-8 would likely alter the pace and nature of corporate governance reform. Many governance practices that are now considered standard—including majority voting policies, independent board leadership structures, proxy access rights, and enhanced disclosure practices—were initially advanced through shareholder proposal campaigns.

Another possible response to a repeal would be the adoption of voluntary shareholder proposal programs by individual companies. Rather than being compelled by SEC regulation to include proposals, companies could establish their own procedures for receiving and evaluating shareholder submissions. Under such a system, boards could commit in corporate bylaws to including proposals from shareholders who meet specified ownership thresholds and holding periods. Companies could tailor these requirements to their shareholder base and governance philosophy while maintaining transparency and consistency.

As with many corporate governance reforms, the devil would be in the details. We anticipate that many shareholder activists and their allies would seek to impose a system similar to current Rule 14a-8, or one with even fewer procedural hurdles and grounds for exclusion. On the other hand, public companies would likely prefer a system that limits the cost and distraction of the existing system. Texas, by way of example, recently enacted changes to the Texas Business Organizations Code to permit (but not require) specified Texas corporations to amend their governing documents to limit the power of any shareholder (or group of shareholders) to submit a shareholder proposal unless the shareholder or group (1) owns at least the lesser of $1 million of market value of voting shares or 3 percent of the corporation’s voting shares, (2) has owned and continues to own those shares for at least six months prior to and through the shareholders meeting, and (3) solicits holders of at least 67 percent of the voting shares to vote on the proposal.

Conclusion

Although Rule 14a-8 serves a role in promoting shareholder participation and corporate accountability, the rule’s low cost for activists and significant costs for companies have generated concerns about misuse and the pursuit of agendas unsupported by the broader shareholder base. The rule’s interaction with both federal securities law and state corporate law further complicates the legal landscape. Companies and activists alike should approach shareholder proposal disputes with careful attention to legal compliance, strategic risk management, and the evolving body of state and federal law governing shareholder rights.

The repeal of SEC Rule 14a-8 would represent a sea change for single-issue shareholder activism. While companies would benefit from reduced administrative burdens, lower legal costs, and fewer activist proposals, activists would lose an inexpensive and frequently used tool. Activism would not disappear, but it would likely become more concentrated among large investors and more reliant on independent proxy solicitations, litigation, and direct engagement campaigns. Whether such a transformation would strengthen or weaken corporate governance remains a matter of considerable debate.