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The U.S. Securities and Exchange Commission (SEC) has signalled a new approach to its regulation of shareholder proposals, especially as they relate to social impact issues. In Staff Bulletin No. 14M, the SEC simplified the procedure for companies to exclude shareholder proposals and expanded the scope of what is considered “excludable.”

Background

Rule 14a-8 sets out rules for when and how shareholder proposals must be included in shareholder meeting materials. It generally allows companies to exclude shareholder proposals that relate to the ordinary business operations of the company, on the basis that such matters are best left to management and the board to decide. Companies often submit no-action requests to the SEC seeking reassurance that the staff will not recommend enforcement action on the basis of excluded proposals. In 2021, the SEC issued Staff Bulletin No.14L advising that, in deciding whether a company is permitted to exclude a shareholder proposal, it would consider “the social policy significance of the issue” and “whether the proposal raises issues with a broad societal impact, such that they transcend the ordinary business of the company.” Generally, such proposals were not considered to be excludable. This approach significantly expanded the power of shareholders to address social and environmental issues.

Staff Bulletin No. 14M

On February 12, 2025, the SEC published Staff Bulletin No. 14M, rescinding its previous guidance and advising that it will consider whether the proposal is “otherwise significantly related to a particular company’s business… or focuses on a significant policy issue that has a sufficient nexus to a particular company” when deciding whether a company can exclude a shareholder proposal. Accordingly, companies can now exclude proposals that address significant social policies if they believe that the relevant policy issue is not sufficiently significant to the company itself.

The new guidance also removes the need for boards to provide analysis in their no-action requests, streamlining the no-action request process. Effectively, the SEC has increased the scope of which proposals are considered excludable and simplified the process of requesting exclusion – making it easier for companies to exclude shareholder proposals that concern ESG-related matters.

The SEC has already shifted its enforcement approach. According to ISS Corporate, 71% of shareholder proposals on the topic of lobbying and political contributions transparency have been omitted from meeting materials in 2025—compared to a rate of only 3% between 2015 and 2024. Similarly, excluding pending proposals, 95% of proposals focused on environmental issues and 62% of proposals focused on social issues have been withdrawn in 2025—likely in anticipation of exclusion under the new SEC guidance.

Looking Forward

Given the new guidelines, shareholder proposals are much less likely to be a vehicle for investors to press for change on social and climate related issues. Political pressure continues to mount, with House Republicans agitating for further action to limit shareholder proposals, particularly on divisive sociopolitical issues. It remains to be seen how the SEC’s response to no-action requests and general treatment of shareholders’ ESG-related concerns will develop.