Rescission of Rule 14a-8 and Amendments to Rule 14a-4(c): What the Proposed Changes Would Mean for Public Companies

Key Takeaways

• On September 16, 2026, the Securities and Exchange Commission (SEC) proposed to rescind Rule 14a-8 under the Securities Exchange Act of 1934 (Exchange Act) in its entirety, which would eliminate the federal framework that requires companies to include qualifying shareholder proposals in their proxy materials and permits companies to exclude proposals on specified grounds. Determinations about the role of shareholder proposals would be left to State law and company governing documents.
• The SEC’s principal basis for the proposed rescission is that Rule 14a-8 exceeds the SEC’s statutory authority under Section 14(a) of the Exchange Act by effectively creating a federal standard governing shareholder voting rights—a matter traditionally reserved to State law. The SEC also cites independent policy reasons, including that the rule’s original justifications have not been substantiated in practice or are less compelling today, and that the rule has had unintended consequences.
• The SEC is simultaneously proposing amendments to Rule 14a-4(c) to broaden the circumstances under which a company may exercise discretionary voting authority on shareholder proposals that will be presented at a shareholder meeting but are not included in the company’s proxy materials. The proposed amendments would also require a check box on the company’s proxy card allowing individual shareholders to opt out of conferring discretionary voting authority.
• Although Rule 14a-8 has been in effect since 1942, the SEC takes the position that longevity does not substitute for legal authority. The proposed rescission would not affect independently existing shareholder voting rights under State law, the Investment Company Act of 1940 (Investment Company Act), or other federal statutory provisions.
• This proposal builds on the SEC Division of Corporation Finance’s earlier decisions—first to narrow, and then to discontinue entirely—staff no-action letter responses under Rule 14a-8, which we analyzed in our August 18, 2026 post. Together, these developments signal a fundamental shift in the federal approach to shareholder proposals.

Background: From No-Action Discontinuance to Proposed Rescission

As discussed in our August 18, 2026 post, the Division of Corporation Finance had already taken significant steps by first narrowing and then discontinuing all staff no-action letter responses under Rule 14a-8. Those decisions removed the informal guidance framework that companies and proponents had relied on for decades to resolve disputes over the inclusion or exclusion of shareholder proposals from proxy materials. The current proposal takes that trajectory to its conclusion: rather than simply ceasing to provide informal guidance under the rule, the SEC now proposes to rescind Rule 14a-8 altogether.

The no-action discontinuance is consistent with the view, now formalized in the proposing release, that Rule 14a-8 had drawn the SEC into determinations about State law corporate governance matters that are best left to other actors. The proposed rescission crystallizes that view into a formal legal position: the SEC concludes that Rule 14a-8 exceeds its statutory authority under Section 14(a) and should be removed entirely. Public company boards and management teams that were already adapting to the absence of the no-action process should now prepare for the possibility that the federal shareholder proposal framework will be eliminated in full.

The Statutory Authority Argument

The SEC’s primary basis for the proposed rescission is that Rule 14a-8 exceeds the SEC’s rulemaking authority under Section 14(a) of the Exchange Act. Section 14(a) makes it unlawful to solicit any proxy or consent or authorization in respect of any security “in contravention of such rules and regulations as the [SEC] may prescribe as necessary or appropriate in the public interest or for the protection of investors.” The SEC reads this authority as limited to regulating the proxy solicitation process, meaning the manner in which shareholders are asked to grant their voting authority, and the information that the soliciting party must disclose.

The SEC draws a distinction between regulating the solicitation of a proxy and determining the scope of the vote that is the subject of such a solicitation. In the SEC’s view, whether shareholders have a right to present a matter for other shareholders to vote on is a question determined by State law, not federal securities regulation. By establishing standards not found in State law for when a shareholder proposal must be included in, or may be excluded from, a company’s proxy materials, Rule 14a-8 effectively dictates the scope of shareholder voting rights and therefore exceeds the SEC’s authority.

The SEC supports this reading with case law, including Business Roundtable v. SEC, 905 F.2d 406 (D.C. Cir. 1990), in which the D.C. Circuit found that the Exchange Act “cannot be understood to include regulation of an issue that is so far beyond matters of disclosure … and that is concededly a part of corporate governance traditionally left to the states.” The SEC also invokes Santa Fe Industries, Inc. v. Green, 430 U.S. 462 (1977), for the principle that absent a clear indication of congressional intent, courts are reluctant to federalize the substantial portion of the law of corporations that deals with transactions in securities.

Evolution of Rule 14a-8 and Departure from State Law

The proposing release traces the history of Rule 14a-8 from its 1942 adoption to its current form to illustrate how the rule has evolved beyond its original purpose. The rule’s predecessor, Rule X-14A-7, originally required a company to include a shareholder proposal that was “a proper subject for action by the security holders,” with the understanding that State law provided the applicable standard.

Over successive amendments, however, the SEC expanded Rule 14a-8 into a detailed framework with 13 substantive bases for exclusion, eligibility criteria based on ownership levels and duration, limits on the number and length of proposals, and a presumption that precatory proposals are “proper unless the company demonstrates otherwise.” The SEC observes that the predecessor rule was approximately 200 words, whereas the current rule exceeds 3,000 words. The SEC concludes that the rule has become a de facto federal standard for shareholder voting rights, displacing the State law inquiry it was originally designed to facilitate.

Policy Reasons for Rescission

Independent of the statutory authority argument, the SEC identifies three policy reasons for the proposed rescission.

First, the SEC argues that the original justifications for Rule 14a-8 are no longer compelling: (1) shareholder proposal costs to companies are no longer small; (2) most proposals fail to receive majority support; (3) proposal volume has grown disproportionately to the number of filers; and (4) State law is often unclear or silent as to what matters may be presented to shareholders, such that the SEC’s rules could not simply facilitate existing State law rights as originally intended.

Second, the rule has had unintended consequences. The SEC notes that Rule 14a-8 has become a mechanism for influencing the interactions between companies and their shareholders in ways inconsistent with the rule’s original purpose, with proponents potentially using proposals to gain leverage in negotiations with company management or to secure private benefits rather than to present proposals for a genuine shareholder vote. In addition, the SEC observes that the existence of Rule 14a-8 places the SEC in the position of making judgments about the application of State law that are best left to State legislatures, courts, and, where permitted by State law, companies. The SEC further notes that the presence of a federal rule has inhibited the development of State law and private ordering, as no State other than Texas has adopted legislation governing shareholder proposals in more than 80 years since Rule 14a-8 was first adopted.

Third, the SEC concludes that retaining any version of Rule 14a-8, even if the SEC had authority, with the clear intention of deferring to State law, is unwarranted because over time it would inevitably be drawn into matters that should be left to States or private ordering, and it would not avoid the unintended consequences identified above.

Proposed Amendments to Rule 14a-4(c)

Alongside the proposed rescission, the SEC proposes amendments to Rule 14a-4(c), which governs when a company may exercise discretionary voting authority on matters not included on its proxy card.

Under the current framework, Rule 14a-4(c)(2) prohibits a company from exercising discretionary voting authority on a timely received shareholder proposal submitted outside of Rule 14a-8 if the proponent (i) notifies the company on a timely basis that it intends to deliver its own proxy materials to holders of at least the percentage of the company’s voting shares required to carry the proposal, (ii) includes the same statement in its own proxy materials, and (iii) provides evidence to the company that it has in fact solicited those holders. The SEC proposing release states that an unintended consequence of this prohibition is that companies may feel compelled to include these proposals on their proxy cards even though neither the federal proxy rules nor existing State law requires their inclusion.

The proposed amendments would eliminate the solicitation threshold mechanism and instead provide companies with the ability to exercise discretionary voting authority on timely received proposals if the company includes: (i) in the proxy statement, a brief description of the matter and how the company intends to exercise its discretion; (ii) on the proxy card, a cross-reference to that disclosure; and (iii) a check box on the proxy card that, if checked by a shareholder, would prevent the company from exercising discretionary voting authority with respect to that shareholder’s shares.

The check box mechanism is designed to balance the additional flexibility granted to companies with individual shareholder control. Under the current rules, a single shareholder proponent can effectively prevent the company from exercising discretionary voting authority with respect to all proxy cards by satisfying the solicitation threshold. Under the proposed amendments, each shareholder would individually decide whether to prevent the company from exercising such authority with respect to that shareholder’s own shares.

The proposed rule would require at least a single check box regardless of the number of matters subject to discretionary voting authority, although companies could voluntarily provide multiple check boxes for multiple proposals.

Zero-Slate Campaigns and Rule 14a-4(d)(1) Interaction

The proposing release also addresses the interaction between Rule 14a-4(c) and Rule 14a-4(d)(1), particularly in the context of “zero slate” campaigns. Following the adoption of the universal proxy rules in 2021, a proponent may include the company’s director nominees on its own proxy card even when it does not nominate competing directors. This structure allows shareholders to vote on the company’s nominees and the proponent’s proposals using the proponent’s proxy card, creating pressure on companies to include the proponent’s proposals on the company’s card to avoid losing votes.

The proposed amendments would address this dynamic by permitting companies to exercise discretionary voting authority even when the proponent has distributed proxy materials to the requisite percentage of shareholders. The proposed amendments would remove the binary choice under which a company that omits a proposal must forgo the ability to exercise proxy voting authority on that proposal through the proxies it receives.

Investment Company Considerations

The SEC proposes to rescind Rule 14a-8 for all companies, including registered investment companies and business development companies. Although the regulatory framework for regulated funds is different, the SEC concludes that Rule 14a-8 exceeds the scope of the SEC’s authority to regulate the proxy solicitation process under Section 20(a) of the Investment Company Act just as with respect to operating companies. The proposed rescission would not affect shareholder voting rights established under the Investment Company Act.

Practical Consequences for Public Company Boards and Management

For public company boards and management teams, if approved in its present form, the proposed rule changes would shift the shareholder proposal landscape in several ways:

• State law and governing documents would determine shareholder proposal rights. Companies would need to evaluate whether applicable State law, their charters, and their bylaws address the inclusion or exclusion of shareholder proposals from proxy materials. In many jurisdictions, State law is currently silent or ambiguous on this subject, and companies may need to consider adopting their own frameworks through amendments to their governing documents.
• Advance notice bylaws would become more important. With the elimination of Rule 14a-8’s federal procedural requirements, and in the absence of clear State legal frameworks, existing advance notice bylaws would become the primary mechanism for establishing submission deadlines and procedural requirements for shareholder proposals.
• Discretionary voting authority analysis would be needed. Companies receiving shareholder proposals not included in their proxy materials would need to assess whether they should exercise discretionary voting authority under the proposed amendments to Rule 14a-4(c), including providing the required proxy statement disclosure and check box mechanism.
• Monitoring State legislative developments would be critical. The SEC expects that rescission would remove disincentives for States to develop their own laws governing shareholder proposals, and companies would need to track developments in their State of incorporation.

Status and Comment Deadline

As of September 16, 2026, the proposed rescission of Rule 14a-8 and amendments to Rule 14a-4(c) remain proposals, not final rules. The public comment period will remain open for 60 days following the publication of the proposing release in the Federal Register. The SEC is also concurrently proposing amendments to modernize certain rules related to proxy solicitations in a separate release.

Market participants therefore cannot rely on the proposed rescission or the proposed amendments to Rule 14a-4(c), and any final rules could differ from the proposal in scope, conditions, or timing. Existing proxy rules continue to apply until any final rules take effect.