On September 10, 2025, the U.S. House Committee on Financial Services hosted a hearing titled “Proxy Power and Proposal Abuse: Reforming Rule 14a-8 to Protect Shareholder Value” to assess the shareholder proposal process, evaluate the influence of proxy advisory firms and highlight legislative solutions to limit shareholder proposals to material issues. The hearing comes at a time of enhanced regulatory scrutiny of the shareholder proposal process and could be indicative of future 14a-8 reform approaches under the SEC’s recently issued Spring 2025 Reg-Flex Agenda.
Draft legislative proposals presented at the hearing to reform the shareholder proposal process, which Committee staff described in its memorandum to the Committee as having been “co-opted by activist investors who prioritize narrow policy goals over maximizing shareholder value,” included (i) raising the ownership requirements for submitting a shareholder proposal, (ii) using private ordering under 14a-8 to allow companies and their shareholders to decide how to apply 14a-8 and (iii) removing 14a-8 altogether and leaving board-shareholder interactions to state law. Proxy advisory firms were also a point of contention, with Small Business Committee Chairman Roger Williams addressing the “outsized influence” of proxy advisory firms and highlighting the recent preliminary injunction against Texas State Bill 2337, which would require proxy advisory firms to disclose when their services are based on non-financial factors.
While these proposals are not necessarily indicative of future SEC rulemaking, we do know that 14a-8 reform is a key priority for the Atkins SEC. On September 4, 2025, the Atkins SEC issued their Spring 2025 Reg-Flex Agenda, which includes a proposal slated for April 2026 to “modernize the requirements of Exchange Act Rule 14a-8 to reduce compliance burdens for registrants and account for developments since the rule was last amended.” SEC Commissioner Mark Uyeda has also been critical of the shareholder proposal process in the past, citing concerns about “shareholder proposal overload” during a speech in 2023. In 2008, then Commissioner and current SEC Chairman Paul Atkins predicted that the shareholder proposal process could result in a “tyranny of the minority” and raised the possibility of companies adopting bylaws under state law to limit or exclude certain types of shareholder proposals. Shortly after Trump’s inauguration, the SEC issued SLB 14M, which rescinded the previous SLB 14L and led to a record number of No-Action Letter submissions and exclusions, particularly under ordinary business grounds. While it is yet unclear how the SEC will refresh the shareholder proposal process, we do expect that the Atkins SEC will lean towards more company-friendly amendments.
With thanks to Jake Baynum, Senior Corporate Governance Specialist, for his significant contributions to this blog post.