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For decades, the Securities and Exchange Commission served as a predictable, even if imperfect, arbiter in one of corporate governance’s most consequential processes: determining when a public company could lawfully exclude a shareholder proposal from its proxy materials. That era, for all practical purposes, is over.
On November 17, 2025, the SEC’s Division of Corporation Finance announced that it would no longer issue substantive responses to company no-action requests under Exchange Act Rule 14a-8— the rule that has, since its initial adoption in 1942, provided qualifying shareholders a mechanism to have their proposals included in company proxy materials for consideration at annual meetings.[1] [3] Weeks later, on December 11, President Trump signed an executive order titled Protecting American Investors from Foreign-Owned and Politically-Motivated Proxy Advisors, directing multiple federal agencies to increase regulatory scrutiny of the proxy advisory industry.[2] Taken together, these two actions represent the most significant structural shift in the shareholder-regulator relationship since at least the implementation of the universal proxy rules in 2022—and arguably the most consequential rebalancing of power between shareholders and boards in decades.[4]
For institutional investors—particularly those who rely on proxy advisory infrastructure, shareholder proposals, and regulatory predictability as core tools of corporate engagement—the implications are profound, immediate, and still evolving.
To appreciate what changed, one must understand what existed before. Under the historical framework, a company seeking to exclude a shareholder proposal from its proxy statement would submit a “no-action” request to the SEC’s Division of Corporation Finance.[3] Staff attorneys would review the company’s arguments, consider the proponent’s rebuttal, and issue a formal response—either concurring that the proposal could be excluded under one of Rule 14a-8’s enumerated bases, or declining to concur, effectively signaling that exclusion would carry enforcement risk.[3] These no-action letters, while technically non-binding, functioned as the principal body of interpretive guidance under the rule, shaping how companies and shareholders alike understood the boundaries of permissible shareholder engagement.[3] [8]
That process produced, over many decades, a rich and detailed body of precedent that both sides of the governance equation relied upon. It provided certainty. It provided accountability. And it provided a check—however informal—on the unilateral exercise of corporate discretion over which shareholder voices would be heard.
What the Division of Corporation Finance announced in November was not a modification of this framework, but a withdrawal from it.[1] For the 2026 proxy season (October 1, 2025 through September 30, 2026), the Division will not review, analyze, or express any views on whether a company has a legitimate basis for excluding a shareholder proposal, with the narrow exception of proposals challenged under Rule 14a-8(i)(1)—the provision addressing proposals that are improper subjects for shareholder action under state law.[1]
The Division cited two justifications: resource constraints stemming from the federal government shutdown and a backlog of registration statements, and the “extensive body of guidance” already available under the rule.[1] The latter justification warrants scrutiny. It is true that decades of no-action letters constitute a body of interpretive material. But that body was never static—it evolved continuously, adapting to new types of proposals, new corporate structures, and new shareholder concerns.[6] To be sure, the no-action process was not without legitimate criticism. It was opaque—staff reasoning was often reduced to a sentence or two, with the underlying analysis never made public.[3] It was slow, imposing real costs on companies navigating tight proxy season timelines.[8] And critics on the corporate side had long argued that the process had become too permissive, allowing an increasing volume of proposals that were immaterial, duplicative, or designed to advance narrow agendas at the expense of the broader shareholder base.[4] These are not frivolous objections. Without ongoing staff review, that precedent risks becoming an increasingly outdated reference point, disconnected from the governance realities of 2026 and beyond.[3] [6]
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If the SEC’s Rule 14a-8 announcement removed one pillar of the shareholder engagement infrastructure, the December 11 executive order took aim at another.
The executive order directs the SEC Chairman, the FTC Chairman, and the Secretary of Labor to review and, where appropriate, revise regulations governing proxy advisory firms—specifically targeting Institutional Shareholder Services (ISS) and Glass Lewis, which collectively control more than ninety percent of the U.S. proxy advisory market.[2] The order characterizes these firms as wielding “enormous influence” and using “their substantial power to advance and prioritize radical politically-motivated agendas”—specifically ESG and DEI considerations—over investor returns.[2] [7] There is a kernel of substance beneath the political framing. ISS and Glass Lewis do operate with limited transparency regarding their methodologies, limited external review of their methodologies, and a market structure that offers institutional investors few meaningful alternatives.[7] [2] The question of whether two firms should exercise that degree of influence over the governance of American public companies—regardless of the political direction of that influence—is a fair one.
Beyond the executive order’s stated policy objectives, it introduces several mechanisms that could materially alter how proxy advice is produced, distributed, and consumed. Among its directives, the SEC Chairman is instructed to assess whether proxy advisory firms should be required to register as Registered Investment Advisers under the Investment Advisers Act of 1940—a classification that would impose fiduciary duties, compliance burdens, and regulatory exposure that these firms have historically avoided.[2] The order also directs the SEC to analyze whether reliance on proxy advisory recommendations causes institutional investors to “coordinate and augment” their voting decisions in ways that could constitute group formation under Sections 13(d) and 13(g) of the Securities Exchange Act.[2] [7]
This latter directive is particularly consequential. If the SEC were to determine that voting in accordance with ISS or Glass Lewis recommendations constitutes coordinated beneficial ownership, large institutional investors could find themselves inadvertently triggering Schedule 13D filing requirements—a classification that carries significant regulatory and reputational consequences, and that is typically reserved for investors actively seeking to influence or change corporate control.[7]
The convergence of these regulatory changes creates several concrete challenges for institutional investors navigating the 2026 proxy season and the governance landscape that follows.
Increased litigation risk in the shareholder proposal process. Without SEC staff review serving as a practical gatekeeper, the burden of evaluating the legal merits of proposal exclusion falls entirely on companies and their counsel.[3] [8] Companies that choose to exclude proposals may face litigation from proponents who, under the prior regime, would have deferred to the more efficient and predictable no-action process. Although shareholder proposal litigation has historically been rare—approximately thirty cases since the 1960s—the removal of the SEC safety net materially increases the probability that proponents and their advocates will turn to the courts.[8] Institutional investors should be prepared for greater uncertainty around which proposals will actually appear on proxy ballots, and for the possibility that legal proceedings could delay the filing of definitive proxy materials or disrupt the timing of annual meetings.[8]
Greater demands on in-house voting infrastructure. For large institutional investors—particularly index fund managers and diversified asset allocators who cast votes across thousands of companies—the operational reliance on ISS and Glass Lewis has been substantial.[5] The executive order’s directives do not immediately prohibit the use of proxy advisory services, but they introduce regulatory uncertainty that could chill the industry’s operations and force investors to internalize more of the analytical work currently outsourced to these firms.[7] Building or expanding in-house stewardship teams is expensive and time-consuming, and the transition period will be uneven.[5] Investors who have historically treated proxy voting as a largely delegated function will need to reassess whether their governance engagement capabilities are adequate for an environment in which proxy advisors operate under increased scrutiny and potentially diminished scope.[7] [5]
A widening information asymmetry between companies and shareholders. One underappreciated consequence of the SEC’s withdrawal from Rule 14a-8 oversight is its effect on the information environment surrounding shareholder proposals. Under the prior no-action process, both the company’s arguments for exclusion and the proponent’s response were submitted to the SEC and made publicly available on EDGAR.[3] Proponents had a formal opportunity to rebut the company’s exclusion arguments, and the resulting exchange of views—company submission, proponent rebuttal, staff determination—created a valuable public record that investors could review to form independent judgments about the merits of the dispute.[3] [6] Under the new framework, a company’s decision to exclude a proposal may be communicated through a perfunctory Rule 14a-8(j) notification that discloses little more than the company’s intent to exclude and the rule provision on which it relies.[1] [3] The proponent’s perspective may never reach EDGAR at all.[3] Investors who want to understand the substance of the company’s reasoning—and whether the proponent has a credible counterargument—may find themselves working with significantly less information than before.
Potential chilling effects on shareholder engagement more broadly. New interpretive guidance on Schedule 13D/13G filing triggers—issued by the Division of Corporation Finance in February 2025—clarified that large investors conditioning their support for a company’s director nominees on the adoption of specific corporate actions could be deemed to hold their securities with the “purpose or effect of changing or influencing control,” potentially requiring them to file on Schedule 13D rather than the less onerous Schedule 13G.[12] Combined with the executive order’s inquiry into whether proxy advisory recommendations create “group” status, these regulatory signals may cause some institutional investors to moderate the specificity and assertiveness of their engagement with portfolio companies.[2] [7] [12] The practical effect could be a reduction in the type of constructive, private shareholder-company dialogue that governance practitioners have spent years developing and refining.[10] [12]
There is a further dimension to these developments that deserves attention from institutional investors focused on fundamental value creation and capital protection.
When the mechanisms of shareholder engagement are constricted—when proposals face higher barriers to inclusion, when proxy advisory infrastructure is under regulatory pressure, and when the threshold for “active” ownership is potentially lowered—the companies that benefit most are those with the least interest in transparency. Firms with undisclosed accounting irregularities, questionable related-party transactions, or aggressive financial reporting practices have always preferred environments in which shareholder scrutiny is limited. This is not to suggest that every reduction in shareholder engagement infrastructure is motivated by a desire to shield misconduct—most companies engaging with these regulatory changes are doing so in good faith. But the effect of weakened oversight mechanisms is not evenly distributed, and the companies with the most to lose from rigorous scrutiny are invariably the ones that benefit most when it recedes. A regulatory environment in which shareholder engagement channels are narrowing—whatever the policy rationale—is an environment that demands compensating mechanisms to ensure that boards remain accountable for the stewardship of investor capital.
This dynamic reinforces the critical importance of independent forensic analysis as a tool of shareholder protection. In an environment where traditional engagement channels are narrowing, the ability to identify objective, quantifiable compliance failures—violations of Generally Accepted Accounting Principles, breaches of securities law disclosure requirements, and demonstrable governance deficiencies—becomes not merely a value-added analytical exercise but a necessary mechanism of investor defense. When the regulatory framework makes it harder to raise governance concerns through the proxy process, the rigor and specificity of the underlying analysis must compensate.
The regulatory landscape of the 2026 proxy season is without meaningful precedent. The absence of SEC staff review under Rule 14a-8, the executive order targeting proxy advisors, the evolving guidance on beneficial ownership reporting, and the prospect of permanent rulemaking changes to the shareholder proposal process collectively represent the most far-reaching recalibration of the shareholder engagement framework in decades.[4]
For institutional investors, the path forward requires several adjustments. First, a renewed investment in in-house governance expertise—whether through expanded stewardship teams, enhanced board-level engagement, or more rigorous integration of governance analysis into investment decision-making processes.[5] Second, a heightened focus on the quality and independence of forensic financial analysis, particularly for portfolio companies where governance risks are elevated. Third, a willingness to engage with the evolving legal landscape—including the possibility that the courts, rather than the SEC staff, will become the primary forum for resolving shareholder proposal disputes.[3]
It bears noting that the regulatory recalibration now underway reflects, in part, a legitimate policy perspective: that the shareholder proposal process had become too costly, too easily exploited by participants with minimal economic stakes, and insufficiently attentive to the interests of long-term investors focused on financial returns.[4] That perspective deserves serious engagement regardless of whether one agrees with every mechanism chosen to advance it. Importantly, the current proxy season may not represent the outer boundary of these changes. “Shareholder Proposal Modernization” remains on the SEC’s Regulatory Flexibility Agenda, signaling that the Commission is considering permanent amendments to Rule 14a-8 that could alter ownership thresholds, resubmission requirements, and the scope of permissible proposal subject matter.[3] The Division of Corporation Finance’s withdrawal from no-action review may, in retrospect, prove to have been less an emergency measure than a transitional step toward a fundamentally different regulatory posture.[3] [7]
What should not change is the foundational principle that shareholders have a legitimate, essential role in the governance of the companies in which they invest. The mechanisms through which that role is exercised may be shifting, but the underlying premise—that capital markets function best when investors can hold boards accountable for the stewardship of their assets—remains as valid as it has ever been.
The question for 2026 is not whether shareholder engagement still matters. It is whether the institutional infrastructure that supports it will prove resilient enough to withstand a period of extraordinary regulatory transition. The investors who navigate this environment most effectively will be those who approach it with analytical rigor, institutional patience, and an uncompromising commitment to the protection of shareholder rights.
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Buxton Helmsley is a New York City-based alternative asset manager specializing in investor advocacy and active corporate engagement. With the Buxton Helmsley name ranking in the top 15% of global activist investors (according to Bloomberg, based on volume of investor engagement), it has been globally recognized for its expertise in forensic accounting, securities law compliance, and shareholder rights protection.
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