I’ve been running a series of blogs with analysis into what transpired during this proxy season with shareholder proposals given Corp Fin’s decision to change the way they hand Rule 14a-8 requests. Here’s a summary of this 66-page study on the topic from Professor Anna Toniolo – which has a bottom line that the SEC’s decision to not referee the Rule 14a-8 process had meaningful substantive consequences – fewer proposals were filed, fewer reached shareholders, governance proposals faced greater exclusion risk and litigation proved an inadequate replacement for SEC staff oversight:
1. Three Competing Predictions:
- No Material Change: Because Rule 14a-8’s substantive standards remained unchanged and proponents could still sue in court, some expected little practical impact.
- More Inclusion: Others predicted companies would become more cautious without SEC staff protection and would therefore include more proposals to avoid litigation and reputational risks.
- More Exclusion: A third view held that companies would exploit the absence of SEC oversight and exclude more proposals, especially those submitted by less well-funded proponents unlikely to litigate.
2. Core Finding: Fewer Proposals Reached Shareholders:
- The study finds a 10% decline in proposals appearing on corporate ballots – falling from 423 in 2025 to 382 in 2026.
- The decline was driven primarily by a reduction in environmental and social proposals reaching votes.
3. Chilling Effect on Proposal Filings:
- Total shareholder proposal submissions dropped 15%, from 619 proposals in 2025 to 526 in 2026.
- More companies received no shareholder proposals at all, suggesting some proponents were discouraged from filing under the new regime.
- Interviews indicated that less-established proponents and certain institutional investors were particularly deterred.
4. Environmental & Social vs. Governance Proposals:
- Environmental and social proposals declined most sharply at the submission stage, implying deterrence before filing.
- Corporate governance proposals generally continued to be filed but experienced higher exclusion rates and reduced ballot access.
- Governance topics such as independent board chair and elimination of supermajority voting provisions were disproportionately affected.
5. Evidence of Increased Exclusions:
- Companies increasingly relied on subjective exclusion grounds, particularly claims that proposals were “false or misleading” or had been “substantially implemented.”
- Textual analysis found examples where companies excluded proposal templates that had previously survived SEC scrutiny or had been allowed on ballots in earlier years.
6. Asymmetrical Treatment of Proponents:
- The study identifies a notable imbalance: companies often excluded standard governance proposals from established individual filers while permitting similar anti-ESG proposals to proceed to a vote.
- This suggests that the policy’s practical effects varied depending on the identity and resources of the proponent.
7. Litigation Did Not Fully Replace SEC Review:
- While litigation increased after the policy change, lawsuits remained rare relative to the number of exclusions.
- Interviews indicated that litigation is generally a realistic option only for large institutional investors, making it an imperfect substitute for SEC staff review.
8. Market Participants Reported Uncertainty:
- Practitioners described highly varied company responses: some companies became more willing to negotiate, while others used the new freedom to omit proposals more aggressively.
- Across constituencies, participants expressed uncertainty about the long-term equilibrium of the shareholder proposal system.
