A Global Deregulation Agenda: Part III

SEC Withdraws Shareholder Proposal Rule Amendments: Implications for Investors

Continuing our series on regulatory retreats, this Part III shifts focus to a single but pivotal U.S. development. In Part II – SEC Rule Retreat, we discussed the SEC’s mid-2025 decision to pause or pull back on a slate of rule proposals, highlighting broad implications for investors. Now we delve into one specific reversal from June 2025: the SEC’s withdrawal of proposed amendments to Exchange Act Rule 14a-8, the shareholder proposals rule.[1] These shelved amendments would have narrowed companies’ ability to exclude shareholder proposals on certain grounds, a change that drew sharp support from investor advocates and equally sharp opposition from corporate issuers. In this article, we analyze what the withdrawn proposal entailed, why it was introduced, the pros and cons voiced by different stakeholders, and what its demise means now for investor protection, shareholder transparency, and capital market governance in the United States.

Shareholder Proposals Rule: Amplifying investor voices or just more noise?

What it was

The proposal and its intent: In July 2022, the SEC under Chair Gary Gensler introduced a proposal to amend Rule 14a-8, the rule governing how shareholder proposals get into company proxy statements.[2] The rule currently lists several reasons a company can exclude a shareholder proposal from the proxy, and the SEC targeted three of these exclusion bases for clarification and tightening. The proposed amendments would have had the following effects:

• Duplication: Redefined what counts as a duplicate proposal. Under the rule14a-8, one proposal would “substantially duplicate” another only if it addressed the same subject matter and sought the same objective by the same means. This narrower definition was meant to stop companies from excluding distinct proposals that happen to touch on a similar topic but approach it differently.
• Resubmission: Aligned the resubmission exclusion with the forementioned duplication test. A proposal would count as a resubmission (and thus be excludable if it had low support previously) only if it substantially duplicated a proposal from a prior year. This would replace the vaguer current rule that allows exclusion of any proposal on “substantially the same subject matter” that failed to earn sufficient support in recent years.
• Substantial implementation: Exclusion is allowed only if the company has implemented the essential elements of the proposal. This is a higher bar than the existing “already substantially implemented” standard, which companies often interpret broadly. By refocusing on “essential elements,” the SEC aimed to prevent companies from excluding proposals by making only superficial or partial changes.[3]

Overall, the withdrawn Rule 14a-8 amendments were intended to clarify and tighten these three exclusion criteria to make the shareholder proposal process more consistent and predictable. The SEC noted that market participants had asked for a clearer framework, and Chair Gensler emphasized that these changes would help shareholders better exercise their state-law rights to propose actions to fellow owners. In other words, the goal was to prevent companies from relying on loose interpretations of the rules to sideline proposals, thereby amplifying investors’ voices in corporate governance.

Why it mattered

A cornerstone of investor oversight: The shareholder proposal mechanism has long been a key way for investors to raise issues and hold management accountable on governance and policy matters. As the SEC itself noted, the process is “a cornerstone of engagement” between shareholders and companies.[4] Through Rule 14a-8 proposals, investors can press for action or disclosure on topics ranging from executive pay to climate risks. By refining the exclusion rules, the SEC aimed to ensure that more proposals get a fair hearing, enhancing dialogue on issues important to shareholders’ long-term interests.

Intended benefits of the changes: Investor advocates strongly backed the proposed reforms, seeing them as overdue adjustments to rebalance the process in favor of shareholder rights. The Shareholder Rights Group, for example, praised the SEC’s effort, arguing the current exclusions had become too subjective and prone to overuse by companies. In a comment letter, they supported the amendments as “overdue changes which would reduce costs and uncertainties to proponents and issuers alike” by “making the process more efficient, objective, and predictable.”[5] Moreover, advocates noted that broad exclusion standards had kept numerous worthwhile proposals off the ballot, depriving fellow investors of the chance to consider issues that could affect shareholder value.

Why it mattered: The push to amend Rule 14a-8 in 2022 also reflected the regulatory pendulum swinging back after earlier changes. In 2020, under a different SEC leadership, rules were adjusted in ways that raised the thresholds for submitting and resubmitting proposals.[6] By 2022, the new SEC leadership was focused on empowering shareholders on ESG and governance matters, and had even issued Staff Legal Bulletins (e.g., SLB 14L in 2021[7]) to reverse prior staff positions that made excluding proposals easier. The proposed 14a-8 amendments were part of this broader investor-focused agenda and were intended to improve consistency.

Why critics objected

Corporate and industry concerns: On the other side of the debate, public companies and business groups viewed these proposed changes with alarm. Many issuers felt that the SEC was tilting too far in favor of activist shareholders at the expense of efficient corporate governance. For example, the Business Roundtable (an association of CEOs) submitted a critical comment calling the proposals “ill-conceived” and urging that they not be adopted.[8] The core objections centered on fears that narrowing the exclusions would flood proxies with repetitive or irrelevant proposals, burdening companies and other shareholders:

• “We’ve done this already”: Companies worried that eliminating the broad “substantial implementation” defense would force them to place proposals on the ballot even when they’ve partially or mostly addressed the issue, potentially diverting attention to rehashing issues considered resolved.[9]
• Duplication and conflicting proposals: The tighter definition of “duplicates” could result in multiple proposals on the same general subject appearing in one meeting, potentially confusing investors. [10]
• Resubmission of failed ideas: Easing the resubmission rules might encourage perennial resubmissions of proposals that had low support, consuming resources on issues with limited investor interest. [11]

Broader themes (“voice versus value”): Critics argue that the shareholder proposal process is frequently exploited by a relatively small group of individuals who hold only minimal stakes in the companies they target.⁷ According to this view, such proponents often advance narrow or idiosyncratic causes that might reflect personal, political, or social agendas rather than issues tied directly to enhancing long-term shareholder value for the broader investor base. From this view, forcing companies to include more of these proposals would not meaningfully protect investors — rather, it could harm them by distracting management and imposing costs borne by all shareholders.

Why it was ultimately withdrawn

Regulatory whiplash and a strategic retreat: The SEC never finalized the 14a-8 amendments and withdrew this proposal (along with 13 others) on 12 June 2025.[12] This withdrawal came amid a broader reversal on numerous initiatives, reflecting a realignment of priorities and resource constraints at the SEC. While the SEC did not issue a detailed explanation for each withdrawal, context suggests an overfull agenda, court challenges on other fronts, and mounting political pressure to scale back.

Overall, what does this mean for investment practitioners?

Recommended actions

• Reassess your firm’s proxy engagement policy. Prioritize early dialogue with issuers to preempt exclusion disputes.
• Review recent SEC no-action letters to understand how exclusion standards are being applied in practice.
• Strengthen coalition building among investors to avoid duplicative proposals and amplify credibility in submissions.
• Consider the optics and materiality of issues before filing. Ensure every proposal clearly links to shareholder value, not just principle.

Decisions to be taken

• Whether to continue pursuing ESG and governance topics through formal proposals or pivot to private engagement.
• How to balance reputational and relationship risks when challenging exclusions.
• Whether to align with investor coalitions or act independently based on mandate and material exposure.

What to keep an eye on

• SEC staff guidance and future legal bulletins that could reshape the practical interpretation of Rule 14a-8.
• Shifts in court decisions that might constrain or expand the SEC’s ability to define exclusion criteria.
• Political signals about shareholder rights and corporate governance that hint at where the next policy swing may occur.

Key takeaways

• The withdrawal pauses reform but not debate. The balance between investor voice and corporate efficiency remains in flux.
• Shareholder advocacy will rely more on strategic engagement and less on rule-based leverage.
• Expect continued divergence in how issuers handle proposals, making monitoring and coordination vital.
• The burden shifts from regulators to practitioners: adapt, coordinate, and refine engagement under the status quo.

You can read “A Global Deregulation Agenda Part I – Remembering the History of Simplifying Regulation to Liberate Growth” here.

You can read “A Global Deregulation Agenda Part II – In the United States, the SEC Hits the Brakes on Several Significant Regulatory Proposals: Implications for Investors” here.

[1]U.S. Securities and Exchange Commission (SEC), “Substantial Implementation, Duplication, and Resubmission of Shareholder Proposals Under Exchange Act Rule 14a-8,” SEC Website, June 2025. [Online]. Available: https://www.sec.gov/rules-regulations/2025/06/substantial-implementation-duplication-resubmission-shareholder-proposals-under-exchange-act-rule. Accessed: 14 Oct. 2025.

[2]U.S. Securities and Exchange Commission, “SEC Proposes Amendments to Shareholder Proposal Rule,” Press Release 2022-121, Washington, DC (13 July 2022). [Online]. Available: https://www.sec.gov/newsroom/press-releases/2022-121

[3] (Refer to note 2)

[4]U.S. Securities and Exchange Commission, “Fact Sheet: Shareholder Proposals under Rule 14a-8: Proposed Rules,” Fact Sheet, Washington, DC (2022). [Online]. Available: https://www.sec.gov/files/34-95267-fact-sheet.pdf

[5]S. Lewis, “The Proposed SEC Amendments to Shareholder Proposal Rule: A Comment from Shareholder Rights Group,” Harvard Law School Forum on Corporate Governance (20 August 2022). [Online]. Available: https://corpgov.law.harvard.edu/2022/08/20/the-proposed-sec-amendments-to-shareholder-proposal-rule-a-comment-from-shareholder-rights-group/

[6]U.S. SEC, “Procedural Requirements and Resubmission Thresholds under Exchange Act Rule 14a-8: A Small Entity Compliance Guide” (28 December 2020). [Online]. Available: https://www.sec.gov/resources-small-businesses/small-business-compliance-guides/procedural-requirements-resubmission-thresholds-under-exchange-act-rule-14a-8-small-entity?

[7]Christopher J. Cummings, David S. Huntington, Brian M. Janson, John C. Kennedy, Raphael M. Russo, Frances F. Mi, David Curran, and David A.P. Marshall, “SEC Issues New Guidance on Rule 14a-8 Shareholder Proposals,” Paul, Weiss Client Memos (9 November 2021). [Online]. Available: https://www.paulweiss.com/insights/client-memos/sec-issues-new-guidance-on-rule-14a-8-shareholder-proposals

[8]Business Roundtable, “Comment Letter Re SEC Proposed Amendments to Rule 14a-8” (12 September 2022). [Online]. Available: https://www.businessroundtable.org/business-roundtable-comment-letter-re-sec-proposed-amendments-to-rule-14a-8

[9] (Refer to note 7.)

[10] (Refer to note 7.)

[11]  (Refer to note 7.)

[12]C. Marcus, “SEC Withdraws Gensler-Era Shareholder Proposal Rule,” Harvard Law School Forum on Corporate Governance (10 July 2025). [Online]. Available: https://corpgov.law.harvard.edu/2025/07/10/sec-withdraws-gensler-era-shareholder-proposal-rule/