SEC Proposes Changes To Requirements For Shareholder Proposals In Proxy Statements

On November 5, the SEC released its widely anticipated proposed changes to some of the procedural requirements for shareholder proposals to be included in management's proxy statement under Exchange Act Rule 14a-8.¹ The proposed changes, which a divided SEC released concurrently with proposed new rules about proxy advisory firms² , come nearly a year after the SEC hosted a roundtable to solicit stakeholder views on the proxy process³ and a related SEC invitation for public comment on the proxy process. The SEC first adopted Rule 14a-8 (formerly, Rule X-14A-7) in 1942 to require management to include in its annual proxy statement any shareholder proposal that was "a proper subject for action by the security holders." Since 1942, it and related rules governing shareholder proposals have been amended several times to impose and update substantive and procedural limitations on the ability of a shareholder to include a proposal for a vote in management's proxy statement.