In order to help companies and investors determine whether a shareholder proposal qualifies to appear on the proxy statement under SEC Rule 14a-8, the SEC has developed a process to allow companies to inquire in advance whether a proposal must be included. The “no action” process is an informal review process through which the SEC staff advises companies and their investors on whether the SEC staff would recommend enforcement action if a company fails to include a submitted shareholder proposal on its annual proxy statement.
The SEC staff periodically recalibrates its interpretation of the rules as it applies in the no action process to reflect current issues of concern to investors and companies. For example, in 2021, the SEC staff issued an interpretive bulletin, Staff Legal Bulletin 14L, which clarified interpretation of ordinary business and micromanagement rules.
The bulletin was subject to pushback from issuers and asset managers. Trade associations, such as the National Association of Manufacturers and Business Roundtable, were critical of the bulletin, asserting that it no longer required that a proposal address an issue that is significant to the company receiving it. Asset managers who vote on shareholder proposals asserted that proposals were becoming too prescriptive.
In 2023 and 2024, following the market response and criticisms, the staff tightened up its interpretations of the micromanagement rule and excluded many proposals on social and environmental issues that had previously been allowed. From November 1, 2023, to May 1, 2024, the SEC staff supported company requests for exclusion of proposals roughly 68% of the time, similar to the average exclusion rate during the first Trump administration, from 2017 to 2020, which was 69%. In 2025, the staff has again tightened its interpretation of the micromanagement rule, excluding, for example, proposals on lobbying disclosure that had previously been permissible since at least 2011.
On February 12, 2025, the SEC staff issued Staff Legal Bulletin 14M to signify a more restrictive posture on proposals that request specific forms of disclosure or actions by companies. The bulletin revoked Staff Legal Bulletin 14L and altered staff interpretations of the micromanagement, ordinary business, and relevance exclusions.
The new bulletin requires that assessment of whether a shareholder proposal transcends ordinary business should be evaluated by looking at the significance of the proposal to the particular company that receives the proposal.
The new bulletin also shifts interpretation of micromanagement from Staff legal Bulletin 14L’s clear guidelines, toward a more subjective staff evaluation as to whether the proposal seeks a specific method, strategy, or outcome that the staff views as more appropriately determined by the board or management. Such new interpretations are anticipated to lead to an increase in the exclusion of environmental and social proposals and fewer such proposals appearing on proxy statements.
In a letter submitted on February 18, representatives of the Shareholder Rights Group, the Interfaith Center on Corporate Responsibility, and As You Sow requested that the SEC refrain from applying the guidance to shareholder proposals filed prior to the issuance of the bulletin: “Shareholders rely on Staff guidance regarding the shareholder proposal process when engaging the management of the companies they own. By filing proposals that adhere to the guidance, shareholders are able to present proposals more likely to conform to Staff understanding of the exclusions in Rule 14a-8. This streamlines the process for investors, companies, and the Staff. Applying new guidance to previously submitted proposals would unfairly penalize investors who followed the extant guidance in good faith, believing that they were following the procedures that would lead to clear results, limiting the need for the costly back and forth of the no-action process.”
Along with new regulatory guidance from the SEC, the investor right to file shareholder proposals has also come under attack from legislation in Congress and lawsuits filed in the federal courts in Texas. The new report, Shareholder Proposals: An Essential Investor Right, offers a detailed and thoughtful defense of shareholder proposals. It catalogues their role in creating a powerful public platform for challenging and improving corporate policies, practices, performance, and impacts and providing an important mechanism for surfacing investor perspectives on material issues. The report further demonstrates how shareholder proposals have enabled investors to safeguard their portfolios from risks and protect the American public by helping to catalyze positive corporate change on an array of issues.
Sanford Lewis
Director and General Counsel, Shareholder Rights Group