Partner Christine M. Fox and Associate Adam Federer are the authors of the Investor Alert, “Proxy Season Goes to Court.”  This alert explores how shareholders are turning to litigation to push back following the SEC’s shift to a more hands-off approach when a company seeks to exclude shareholder proposals from proxy consideration.

While shareholders have traditionally voted on and submitted their own proposals on a wide range of governance issues, recent policy shifts within the SEC have undercut the typical shareholder process.  Christine and Adam review the clearly defined procedures under SEC Rule 14a-8 for both the proposal process and how a company can exclude proposals from a vote, with companies often seeking a no-action letter from the SEC to shield them from liability for a shareholder suit over exclusion.  However, they note that the 2025-2026 proxy season has seen a significant shift in the balance of power between management and shareholders, after SEC Chairman Paul S. Atkins questioned whether shareholders should have the right to submit proxy proposals at all and the SEC announced that it would generally not respond to or express views on most Rule 14a-8 no-action requests.

The authors assert that shareholders are now facing increased pressure to take matters into their own hands to push back “against the SEC’s deferential approach and companies attempts to silence their proposals.”  Christine and Adam outline successful actions against AT&T, Axon Enterprise, and PepsiCo as prime examples where shareholders secured either the inclusion of their proposals on company proxy ballots or favorable orders urging the parties to negotiate a compromise shareholder proposal to be voted upon.  Although litigation under Rule 14a-8 has historically been uncommon, they conclude that recent shareholder victories in federal courts “demonstrate that litigation in this area can serve as an effective means for investors to challenge the exclusion of their proposals.”