The US Securities and Exchange Commission (SEC) has altered the criteria under which companies may seek approval to omit shareholder proposals from annual meeting ballots — a change widely viewed as tightening the rules for investor activists pressing issues such as climate risk and workforce diversity.
In a notice published on Monday, the regulator said that until at least June next year, it will no longer rule on several common company objections, including whether a proposal was submitted on time or whether the proponent holds a sufficient stake. The SEC will now only consider challenges based on jurisdictional grounds, such as state laws that allow companies to exclude certain resolutions.
The shift follows comments last month from SEC Chair Paul Atkins — appointed during the Trump administration — who suggested many shareholder proposals may be improper under Delaware law. This has prompted expectations that companies will increasingly rely on state-level exemptions to seek permission to block resolutions.
Erik Gerding, a partner at Freshfields and former director of the SEC’s Division of Corporation Finance, warned of far-reaching implications. “Depending on whether Delaware courts and its legislature back Atkins’ views, this could be the end of shareholder proposals as we know them,” he said.
Companies typically seek SEC assurances
Hundreds of firms approach the SEC each year for assurances that they can exclude certain shareholder resolutions without facing enforcement action. Historically, the regulator has granted such requests around half the time.
Proposals related to emissions disclosure, diversity and other ESG issues have dominated recent annual meetings, even as support from major investors has declined. Asset managers argue that fewer votes are necessary as companies have voluntarily adopted reforms, while Republican lawmakers have criticised ESG-related efforts and pressured regulators to curb activist influence.
Sanford Lewis, an attorney representing ESG-focused investors, warned that the SEC’s policy shift could allow companies to block “nearly all proposals”, describing it as “an extreme assault on shareholder rights”. Activists may increasingly turn their attention to targeting individual board members instead, he added.
SEC cites resource constraints
An SEC spokesperson said the revised approach follows “thorough consideration” of the staff’s role, resources and workload. With more than 900 registration statements and numerous filings received during the government shutdown, the spokesperson said the change would enable staff to focus on “time-sensitive transactional matters, including capital formation and investor protection”.
However, SEC Commissioner Caroline Crenshaw, the sole Democrat on the five-member panel, condemned the decision. She described the move as “more of a giveaway to issuers than an exercise in resource allocation” and “an act of hostility toward shareholders.”
