On September 16, the SEC proposed to rescind Rule 14a-8 under the Exchange Act, which requires companies to include shareholder proposals in their proxy materials under certain conditions. The SEC stated that the rule exceeds the scope of the Commission’s statutory authority under Section 14(a) of the Exchange Act and intrudes into matters of state law. The Commission also cited independent policy reasons for the proposed rescission, noting that: (i) many of the justifications for adopting the rule have not been substantiated in practice or are less compelling today; (ii) the rule has become a mechanism for influencing company-shareholder interactions in ways inconsistent with its original purpose; and (iii) its existence has inhibited the development of state law and private ordering. The SEC stated that the proposed rescission would not eliminate the concept of shareholder proposals but would instead leave determinations about the role of shareholder proposals to state law and company governing documents. Under the proposal, the SEC would also amend Rule 14a-4(c) to broaden the circumstances in which a company may exercise discretionary proxy voting authority on shareholder proposals not included in its proxy materials, while providing shareholders with the ability to prevent the company from exercising such authority with respect to their individual shares.

Separately, the SEC proposed amendments to modernize the proxy solicitation process. The proposed amendments would eliminate the requirement that companies deliver an annual report to security holders, given that this information largely overlaps with 10-K filings already accessible on EDGAR. The proposal would also eliminate the delivery deadline when documents are incorporated by reference into a proxy statement as well as the requirement and the ability to submit Notices of Exempt Solicitation, noting that the vast majority of such notices in recent years were voluntary submissions not contemplated by the rule. The proposal would also shorten the minimum broker search period from 20 business days to five business days. Lastly, the proposed amendments would require contact information for a representative on the cover pages of Schedule 14A and Schedule 14C. Comments on the proposals must be submitted by November 20.