SEC Proposes To Rescind Rule 14a-8, Modernize Proxy Rules

Key Takeaways

• The SEC’s proposal to rescind Rule 14a-8 would eliminate the SEC’s role in the shareholder proposal process, leaving the process entirely to state corporate law.
• Companies should reassess their advance notice bylaws now and reconsider shareholder proposal rights in light of the rescission of Rule 14a-8.
• Companies can expect uncertainty in the regulatory landscape governing shareholder proposals, since many state corporate statutes do not clearly address shareholder proposal rights. Notably, the Council of the Corporation Law Section of the Delaware State Bar Association has stated that it is incorporating the potential rescission of Rule 14a-8 into its annual review of Delaware’s corporate statutes. Companies should also monitor developments from stock exchanges and proxy advisory firms, such as Glass Lewis and ISS, which may respond to the rescission of Rule 14a-8 with their own guidance on shareholder proposals.