10/1/2026
U.S. Companies Adapt to Stewardship’s ‘New Normal’ After SEC Changes
Responsible Investor (10/01/26) Webb, Dominic
The U.S. Securities and Exchange Commission’s (SEC) updated guidance on ownership filings caused a degree of panic among large investors when it was published last year. The regulator said large shareholders or groups that engage on certain issues and link voting decisions to company actions may lose their passive investor 13G protection, and trigger more onerous 13D filing requirements for activist investors. Investors responded to the guidance by canceling meetings on extremely short notice – even in the middle of activist proxy fights. Some would even show up and not say a single word for the entire meeting, according to market participants. The radical reordering of the U.S. engagement rulebook then continued, with the SEC stepping back from responding to no-action requests on shareholder proposals, and proposing the rescission of federal rules governing proposals altogether. Investors and shareholder advocates have made their views clear on the changes, but corporate advisers say the landscape could also be unhelpful for companies themselves. Chris Hayden, North America managing director at shareholder engagement and proxy solicitation firm Georgeson, says he is not sure the problem the SEC attempted to solve on 13D/G was actually a concern for corporates. “I think investors and issuers had gotten to a point where there was a high level of comfort having meaningful engagement and you didn't see a lot of trading votes for certain activities,” he says. And in areas where many corporates would like changes, such as the shareholder proposal landscape, the new environment has created unwelcome uncertainty. The SEC is consulting on whether to rescind Rule 14a-8, governing the inclusion of proposals on corporate proxy materials. “To be frank, most companies don't view the shareholder proposal process too positively,” says Michael Mencher, special counsel at law firm Cooley. “A lot of companies are frustrated by the politicization of it in recent decades on both sides of the spectrum. It feels like, for many companies, they're in a 'can't win' scenario no matter what they do.” However, he adds that there is a “better the devil you know” dynamic among firms, who have built structures around the current rules, which have been in place since World War II. Aside from Texas, which implemented a state law allowing companies to set filing thresholds, no company or state has set its own rules for shareholder proposal filing, leaving a number of question marks should rescission go ahead. In Delaware, where around two-thirds of S&P 500 companies are incorporated, the Council of the Corporation Law Section of the Delaware State Bar Association has said it will integrate the proposals into its annual review of Delaware’s corporate statutes. “Boards are not sure how exactly the landscape will shift,” says Iliana Ongun, co-head of the public M&A practice at law firm Milbank. “There’s likely to be a meaningful period of uncertainty as we see whether states pass legislation that provides a clear path to inclusion or exclusion of shareholder proposals in the proxy statement, or whether those states pause and leave room for private ordering.” In the absence of state or federal rules, market participants expect that companies may adopt rules for filing in their own bylaws, known as private ordering. One possible template for this came in 2010, when the SEC attempted to allow shareholders to include their own director nominees in a company’s proxy statement if they collectively held more than 3 percent of shares for at least three years. While the rule was struck down in court, many companies adopted proxy access in their own bylaws after receiving shareholder proposals requesting they do so. The National Legal and Policy Center, a prominent filer, has already filed at Microsoft (NASDAQ: MSFT), Procter & Gamble (NYSE: PG), and Oracle (NYSE: ORCL), requesting them to adopt a policy allowing proposals on their ballot subject to certain ownership thresholds and compliance with other aspects of 14a-8. According to a document seen by Responsible Investor, Microsoft has agreed to continue tabling resolutions for its 2027 annual meeting in exchange for a withdrawal. A spokesperson for the firm said that the agreement “provides Microsoft and its shareholders a clear and predictable process for the next proxy cycle.” Procter & Gamble is recommending a vote against, as the request comes in response to regulatory changes that are yet to occur, but its AGM in October will provide an early pulse check of investor sentiment on the topic. Cooley’s Mencher warns that voluntary approaches could prove to be tricky for companies to implement. “You’re telling us we have to turn our corporate secretary into a private SEC that has to be judge and jury on these proposals and then justify itself? “It’s just a business companies don’t want to get into.” If ownership thresholds stay the same, Mencher expects firms that introduce private ordering to give themselves the ability to manage the number of proposals they have on their proxy card every year, and avoid proposals “that are really a distraction and counterproductive.” Many companies’ bylaws already permit shareholders to submit business for consideration at an annual meeting independently of Rule 14a-8. This is subject to certain advance notice and procedural requirements, and has rarely been invoked as Rule 14a-8 offered an easier and cheaper avenue, according to a note by law firm Paul Weiss. “Companies should review their bylaws now,” says Milbank’s Ongun. “Boards should work to ensure that their advance notice bylaw provisions are defensible and appropriate for the company’s governance profile, as well as being well drafted.” Companies and investors have had more time to adapt to the SEC’s 13D/G changes following the initial disruption. “In many instances, the investor has basically said it’s up to the issuer to set the agenda,” says Georgeson’s Hayden. “If there’s a hot topic, the issuer has to broach the topic.” The changes have also reduced transparency for companies as to investors’ thinking. Last year, DWS paused its U.S. engagements until September, and avoided sending post-AGM letters to U.S. companies explaining votes against management due to “regulatory uncertainties.” Similarly, RBC Capital Markets said in a note that investors have softened language in their voting policies, stripping out details on possible voting decisions and issues of concern, and altogether reducing detail. “Less transparency into specific voting decisions means that voting outcomes may become less predictable for corporates,” the bank’s analysts said. The SEC recently issued updated interpretations on some of the 13D/G conversations, aiming to allow large shareholders to have conversations initiated by issuers and to seek clarification on certain issues. Carmen Lu, a partner in the M&A and activism defense practice at Paul Weiss, says these updates create “unofficial safe harbors” for issuer-shareholder discussions, and indicate that the SEC may have been surprised by the strong reaction to the original changes. Regardless of the avenues available to investors to raise their concerns, “shareholder engagement isn’t going away,” says Ongun. “I think the question is whether it gets channeled through a structured process at the state level, or it shifts into less predictable channels like litigation and proxy contests. “Vote-no campaigns, open letters, books and record demands, fiduciary litigation – those all remain as potential tools for activists to use to further their agendas.” Investors have already engaged specific directors at firms they believe are taking advantage of the SEC’s pullback from no-action requests, and RBC Capital Markets analysis found that companies identified by the Interfaith Center on Corporate Responsibility as having weak arguments to exclude proposals saw elevated opposition and significant votes against specific directors. However, Lu warns that vote-no campaigns may draw more scrutiny to director performance but “very rarely succeed in ousting a director.” “I don’t think these campaigns really move the needle in most situations,” she says. “When you launch too many vote-no campaigns, you also lose credibility and the market stops noticing. It’s like the boy who cried wolf.” The changing market environment is also introducing uncertainty for firms, with the rise of customized voting reducing the influence of proxy advisers’ house views. “ISS and Glass Lewis’ influence is waning, but still meaningful,” says Lu. “The transition phase over the medium to longer term towards customized voting is going to create a fair amount of uncertainty, and it's going to be hard to know for sure how investors are going to vote.” Meanwhile, AI is increasingly being integrated into stewardship. Investors and proxy advisers are upping their use of machine learning tools to read proxy statements and collect information – and even to make voting recommendations, says Hayden from Georgeson. “I think issuers need to start thinking about their proxy statement and is it AI friendly, AI readable?” he says.
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