US SEC extends hands-off policy on shareholder proposals, raising governance concerns

The SEC has decided to keep its hands off one of the most consequential levers in corporate governance, and shareholder advocates are not happy about it. The agency announced that its staff will generally not provide substantive responses to company requests seeking permission to exclude shareholder proposals from proxy ballots, a procedural shift that effectively leaves corporations to police themselves on what investors get to vote on.

The policy, first announced on November 17, 2025, covers the entire 2025-2026 proxy season running through September 30, 2026. It means companies can now exclude shareholder proposals with little more than a form letter from SEC staff, rather than the detailed guidance that had been standard practice for decades.

What actually changed

Under the old system, when a company wanted to exclude a shareholder proposal from its proxy statement, it would file a “no-action” request with the SEC under Exchange Act Rule 14a-8. SEC staff would then review the proposal, weigh the company’s arguments, and issue a letter either agreeing or disagreeing with the exclusion.

Now, SEC staff will issue what amounts to a “no objection” letter if a company provides a valid rationale based on existing rules or judicial precedent. But the staff won’t actually evaluate whether the rationale holds water. The agency cited resource constraints following a government shutdown as the reason for the change, along with the availability of extensive prior guidance on the subject.

Companies are still required to send an 80-day notice under Rule 14a-8(j) when they intend to exclude a proposal. That procedural guardrail remains intact. But the substantive backstop—the part where SEC staff actually said “yes, this exclusion makes sense” or “no, you need to put this on the ballot”—is gone for the foreseeable future.

The only exception carved out so far applies to proposals falling under Rule 14a-8(i)(1), which covers proposals that are improper under state law.

Why activists are pushing back

Investor groups and activist organizations have responded to the policy with pointed criticism. Their core argument is straightforward: without SEC staff scrutiny, companies face fewer checks on their ability to keep inconvenient proposals off the ballot. Investor advocacy groups have urged the SEC to either restore the previous no-action process or implement a replacement that preserves meaningful oversight.

There’s also a legal wrinkle worth noting. SEC staff views on no-action requests were always technically non-binding. But in practice, those letters carried significant weight because they signaled how the agency might react if a dispute escalated. Without that signal, companies excluding proposals now face a murkier legal landscape.

The broader governance landscape

Correspondence through mid-2026 confirms that many shareholder proposals have continued to advance to a vote even without SEC staff input.

Proxy advisory firms like ISS and Glass Lewis may end up filling part of the void. If companies exclude proposals that proxy advisors consider legitimate, those firms could issue negative voting recommendations on related management proposals.

What to watch going forward

The persistence of the policy through at least September 2026 means this isn’t a temporary blip. Without SEC staff concurrence, companies that exclude proposals are more exposed to litigation from proponents arguing their proposals were improperly kept off the ballot.

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