Spotlight on shareholder confidence in the US

Over the past year, shifts in tone and tenor have made the future of shareholder rights in the US uncertain. Individually, each of these small changes affect only a certain subset of investors – like those holding more than 5% of company shares or those who regularly file shareholder proposals – but taken together, they represent a notable shift away from enabling shareholders to fully exercise their rights as owners of capital.

Shifting stances on shareholder rights in the US

As the PRI highlighted at the start of the 2025 proxy season, stewardship remains one of the key means for investors to protect and enhance long-term value for clients and beneficiaries. It is also clear that the relationship between investors and investee companies improves decision-making and reduces the likelihood of poor outcomes arising from strategic, operational or financial choices within an organization.

Responsible investors around the world are watching closely the general shift in the US away from robust shareholder rights and toward a more deferential position to corporate management. Elsewhere, national markets are bolstering their shareholder rights and attracting global capital for their efforts.

• Earlier this year, South Korea implemented changes to its Commercial Act to expand voting opportunities for minority shareholders and reduce the “Korea Discount”, a market phenomenon of lower valuation stemming from governance concerns.¹
• In Japan, corporate reforms are aimed at unwinding decades-old practice of holding strategic shares in other companies, which insulated company management from shareholder scrutiny.²

America continues to be a global destination for capital, but past performance does not guarantee future results. The historic rights of investors are not a power-play or an inconvenience. The ability to engage with investee companies, offer proposals and vote creates investor confidence in the stable, long-term management of a company and reduces the cost of capital for companies and entire markets.

Federal and state regulators alike should continue to support investor rights so that American capital markets continue to be the deepest and most liquid in the world.

Changes at the Securities and Exchange Commission (SEC)

In September, the SEC published its forward-looking policy agenda. Included is a proposal to modernize the shareholder proposal process, which Chairman Atkins says is in need of a “fundamental reassessment.” Atkins has also called for a “rationalization” of disclosures which he argues have become overly burdensome to companies and less useful to investors over time.

Taken together, there is growing concern from investors that the SEC is looking to develop a system drastically different from the one they have relied upon for more than 90 years.

Since its creation, the SEC has put investor protection at the center of its work. In one of the first public speeches given by the SEC’s founding Chairman, Joseph P. Kennedy (father to future-President John Kennedy) said that building investor confidence is “… an important part of the job we are trying to do here in the Securities and Exchange Commission to reassure capital as to its safety in going ahead and reassure the investor as to the protection of his interests…”.

In the past year, announced changes and public statements from the SEC have shaken the confidence of many investors. The lack of formal rulemakings around these topics limits avenues for investors in the U.S. capital markets to substantively engage with the SEC on changes that may affect their regular, time-tested practices.

No action on no-action

In November, the SEC’s Division of Corporation Finance announced that for the 2026 proxy season, it will not respond to no-action requests for companies seeking to exclude a shareholder proposal on the bases of exclusion outlined in Rule 14a-8, unless the reason for exclusion relates to state law.

The SEC’s no-action process allows regulated entities to seek informal SEC views on whether staff would recommend enforcement for a specific action, such as if a company omits a shareholder proposal from its annual general meeting ballot. The phrase “no-action” comes from the staff opinion that the SEC would likely take no enforcement action against the entity for the proposed activity.

In the announced change, SEC staff cite the 1976 “Statement of Informal Procedures for the Rendering of Staff Advice With Respect to Shareholder Proposals” which says that “there is no requirement that companies seek the staff’s views regarding their intended exclusion of a proposal, and no response from the staff is required.” Notably, the quoted 1976 document also states that, “In summary, the sole purpose of staff review and comment with respect to proxy matters, including; stockholder proposals, is to promote compliance with the proxy rules and to assist both management and the Commission in avoiding the possibility of unnecessary litigation between them.”

PRI reported that in 2025, SEC staff denied approximately one-third of all no-action requests – meaning the SEC disagreed with company plans to exclude a proposal. Under the new process, these companies may go ahead and exclude these proposals, which SEC staff would previously have advised be included in the AGM ballot.

Without the SEC providing substantive responses to proposed company exclusions, the US risks shareholders increasingly seeking review of an exclusion via the more costly (for both parties) and less accessible process of litigation or increasing votes against directors.

Spotlight on state law

In October, SEC Chairman Atkins gave a speech arguing that the SEC, including via Rule 14a-8, is meant to support the rights of shareholders provided under state law, rather than any rights originating from the SEC, and as such, the SEC should be deferential to state laws.

For example, Texas recently amended state law to allow companies to set a significantly higher ownership threshold for shareholders to offer proposals than those currently set by SEC rules. While the SEC requires shareholders to hold $2,000 in shares for three years, $15,000 for two years, or $25,000 for one year, Texas incorporated companies can now require shareholders to hold $1,000,000 or 3% of total voting shares in order to offer a proposal.

The Chairman also suggested in the same speech that precatory (non-binding) shareholder proposals may not be a “proper subject” for action by shareholders under Delaware state law and may therefore be excludable under the SEC’s rules. Delaware is home to more than 2 million registered business entities (including two-thirds of the Fortune 500), which generates over $2 billion a year in franchise fees for the state.

In March, Delaware was prompted to make changes to its corporate laws – such as limiting shareholder “books and records” inspections in investigations – to disincentivize companies from reincorporating in states like Texas and Nevada that are positioning themselves as more business-friendly regulatory regimes.

Now, investors are wary of a “race to the bottom” on shareholder rights. States are increasingly competing for incorporations (and related tax revenues), citing favorable rules that reduce operational costs – like those stemming from excessive litigation or activist shareholder proposals .

Voting

Should a shareholder proposal be included in a company’s proxy materials, institutional investors face increasing political pressure to vote in-line with corporate management’s recommendations.

The role of proxy advisory firms has been in the spotlight for many years, most recently in an Executive Order calling for regulators to broadly reevaluate their role in the financial system. The two largest proxy advisors, ISS and Glass Lewis, represent 80% of the US market, and have regularly been called to testify before various Congressional committees to answer questions about their business practices – particularly regarding allegations that they use their influence to push progressive policies at America’s largest financial managers.

Texas formalized these criticisms earlier this year by enrolling a new law, SB 2337, which requires proxy advisors that recommend a client vote based on “non-financial factors” or against the recommendation of a company’s management, without other qualifying activities, to publicly disclose that their recommendations are “not provided solely in the financial interest of the shareholders.” The law significantly impairs the ability of advisors to provide recommendations to their clients, requiring additional documentation when proposing a vote against management. The law is currently being challenged by a number of parties in federal court.

At the retail level, in October, ExxonMobil debuted a program allowing individual investors to opt into an automatic position to vote with management’s recommendation. ExxonMobil used the SEC’s no-action process to confirm that this new program did not run afoul of the rules governing proxy voting. ExxonMobil has been sued by the City of Hollywood Police Officers’ Retirement System over the new program, and this litigation is pending.

Looking ahead to 2026

The PRI will share the perspective of responsible investors in any proposed change to the shareholder proposal process through the required notice and comment period. In the meantime, signatories can stay up to date on the latest news and engage with us directly:

• Join our LinkedIn group which provides the latest policy news and insights in the US.
• Sign up for our monthly policy newsletter to receive major policy updates from around the world.
• Get in touch with your contact at the PRI – we are here as a resource and want to better understand your challenges and successes in this environment to help promote best practice responsible investment. Reach out to info@unpri.org if you’re not sure who to contact.