On September 16, 2026, the US Securities and Exchange Commission (SEC) took action to propose the rescission of Rule 14a-8. If adopted into a final rule, rescission would return control over the public company shareholder proposal process to the states and corporate governing documents. In addition to public companies, the rescission would also apply to investment companies and business development companies subject to the rule.
The SEC’s fundamental justification for rescission is the assertion that the current iteration of the rule exceeds the SEC’s statutory authority. To support this position, the proposing release includes a detailed history of the rule’s origins going back to the 1940s and its various amendments over the subsequent decades, and in doing so describes a kind of SEC mission creep over the years. Citing heavily to administrative law case law, the proposing release posits that nothing in Section 14(a) of the Securities Exchange Act of 1934 authorizes the SEC to regulate the scope of the voting or other rights shareholders may have under state law, including the right to propose a matter for a shareholder vote.
In sum, the SEC now believes “Rule 14a-8 exceeds the plain and best reading of the Commission’s rulemaking authority under section 14(a).” In this respect, the SEC acknowledges that “Rule 14a-8 has been in existence for many years and that both shareholders and companies are likely to have shaped certain governance and engagement practices around the rule’s provisions.” The SEC notes, however, that “agencies may not add to their powers by adverse possession; longevity is not a substitute for legal authority.”
Separate and apart from the SEC’s authority arguments, the agency also lists a series of public policy considerations that support repeal. First, the SEC asserts that many of the original justifications for adopting Rule 14a-8 are less compelling today or are no longer substantiated. Additionally, the SEC cites a series of ongoing unintended consequences of the current rule. For example, the SEC states that Rule 14a-8 “has become a mechanism for influencing the interactions between companies and their shareholders in ways that are inconsistent with the rule’s original purpose.” Moreover, the SEC states that the rule puts the agency in the position of making judgments about the application of state law that are best left to others. The SEC also believes the existence of a federal rule has inhibited the development of state law and private ordering. According to the SEC, retaining Rule 14a-8 is unwarranted and, even in a modified format, is unlikely to avoid future unintended consequences.
The SEC also proposed to amend Rule 14a-4(c)(2) to no longer prohibit a company from exercising discretionary voting authority with regard to shareholder proposals received outside Rule 14a-8, regardless of whether the shareholder proponent delivers its own proxy materials to holders of the requisite percentage of the company’s shares necessary to carry the proposal. Under the proposed amendments, a company would be able to exercise discretionary voting authority with respect to timely received shareholder proposals if it includes: (1) in the proxy statement, a brief description of the matter (e.g., “a non-binding proposal from a pension fund that the company adopt a proxy access bylaw provision”) and how the company intends to vote through its exercise of discretionary authority; (2) on the proxy card, a cross-reference to the location of this disclosure in the proxy statement; and (3) a check box on the proxy card that, if checked by a shareholder, would prevent the company from exercising its discretion.
The SEC believes the amendments to Rule 14a-4 are necessary in light of universal proxy and the phenomenon of zero-slate campaigns by shareholder activists. Under the proposed amendments, a proponent’s proxy card could include the company’s nominees, management proposals, and the proponent’s proposals, while the company’s card could include only the company’s nominees and management proposals. According to the SEC, the company could then exercise discretionary voting authority to vote proxies it receives against the proponent’s proposals, other than for proxy cards the company receives on which shareholders have checked the proposed box.
Public comments are due 60 days after publication of the proposal in the Federal Register. Current Rule 14a-8 remains in effect for the 2026-2027 proxy season, and we discuss the SEC staff’s recent actions on Rule 14a-8 for the coming season here.
