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SEC makes permanent shareholder-proposal exclusion freeze
Freshfields data shows 66% of known proposals were on proxies as of June 15, up from 59% last year, while investor groups warn litigation risk could rise for companies that omit resolutions.
The U.S. Securities and Exchange Commission has made permanent its decision to stop reviewing whether companies can exclude shareholder proposals from annual meeting votes, extending a freeze it put in place last November, according to Insurance Journal. The SEC said the move will allow its Division of Corporation Finance to focus on a broader review of corporate filings, citing an extensive body of guidance on when shareholder proposals may be excluded.
Previously, companies sought assurances through SEC “no-action” letters that the agency would not act if executives skipped votes on certain proposals, including those tied to issues such as carbon emissions or workforce diversity. Companies have argued such requests can micromanage operations or involve matters not suited for shareholder attention.
The change has not yet dramatically shifted outcomes. A count by law firm Freshfields found that, as of June 15, 66% of known proposals were placed on proxies, compared with 59% last year.
Despite the limited impact so far, activists and corporate governance professionals say the policy can weaken their influence and raise legal and operational costs. SEC Chairman Paul Atkins criticized some CEOs in July for being slow to use available tools, while Tim Smith of the Interfaith Center on Corporate Responsibility said investors may face fewer options if companies omit resolutions, and Marc Lindsay said litigation over exclusions has typically ended in favorable outcomes for proponents, increasing distraction and cost, with concerns extending into 2027.