Yesterday, the Securities and Exchange Commission, Division of Corporate Finance (CorpFin) announced an update to its role regarding proxy decisions.
CorpFin stated that “due to current resource and timing considerations following the lengthy government shutdown and the large volume of registration statements and other filings requiring prompt staff attention, as well as the extensive body of guidance from the Commission and the staff available to both companies and proponents, the Division has determined to not respond to no-action requests for, and express no views on, companies’ intended reliance on any basis for exclusion of shareholder proposals…”
This is regarding shareholder proposals, where eligible shareholders, even smaller ones, may submit proposals for inclusion in a company’s annual proxy material. At times, this can delve into more political or social objectives that veer from a firm’s goal to drive shareholder value.
The House Financial Services Committee, led by the majority Republicans, issued a statement lauding this decision as it would deter specious proxy requests that may undermine shareholder value:
“The Committee applauds the [SEC] updated approach to the Division of Corporation Finance’s role in the 14a-8 process for the 2025-2026 proxy season. This revised approach will better allow companies to exclude shareholder proposals submitted by activist investors that harm shareholder value. The Committee will continue to advocate for transparency and predictability in the shareholder proposal process and looks forward to engaging with the SEC as these changes are implemented.”
Current leadership at the SEC has taken a more business and investor-friendly approach when compared to the prior administration, which sought to undermine innovation and deter capital formation while pursuing new rules under the guise of ESG ambitions.