SEC Chair looks to strip shareholders of their rights 

Donald Trump’s U.S. Securities and Exchange Commission (SEC) Chair Paul Atkins delivered a speech on Oct. 9 arguing for an end to precatory shareholder proposals — the non-binding resolutions that SHARE and our institutional investor clients file to propose corporate governance and oversight improvements on issues ranging from climate risk to board composition and charters to executive pay.

Atkins painted shareholder proposals as a distraction, saying that they “politicize” the proxy ballot and divert attention from what he sees as the core business of electing directors and voting on binding matters proposed by management.

That’s a long-standing complaint from corporate lobbyists, so nothing new.

But Atkins then argued that non-binding proposals have no proper basis in state corporate law, particularly Delaware law, which governs most U.S. corporations. If that’s true, he says, then Rule 14a-8 of the Securities Exchange Act — the rule that allows investors to submit proposals — should not permit them either.

Atkins suggested a process in which companies incorporated in Delaware could request SEC “no-action” relief to summarily exclude a shareholder proposal, provided they submit a legal opinion from counsel saying the proposal isn’t a “proper subject” for shareholder action under state law, and that the SEC would then grant companies the right under that process to prevent shareholder proposals from going to a vote.

If shareholders file a contrary legal opinion to defend their legal rights, Atkins floated the idea of sending a question directly to the Delaware Supreme Court for a declaratory judgment.

That’s no small change. Atkins is proposing an ad hoc route that sidelines investors entirely. He is proposing a radical, fundamental re-write of SEC rules without going through the SEC’s legal rule-making process, a process that requires public consultation, comment, and rigorous justification. Atkins is inviting companies to test the boundaries, one by one, with the SEC’s Division of Corporation Finance standing by to greenlight exclusions.

Let’s be clear: it’s not normal for the SEC to reshape shareholder rights through a patchwork of no-action letters and court certifications. It sidelines the investors the SEC was established to protect and hands corporate lawyers the keys to decide whether corporate management has to answer to its shareholders or not.

And Atkins is not just wrong on process, he’s also wrong on the facts.

Non-binding proposals are not “political sideshows”. They are part of the fabric of modern corporate governance, set in place more than 80 years ago. They allow shareholders, including our clients, to raise emerging risks before they spiral into crises, and they give boards a window into shareholder priorities. Eliminating them would mean less dialogue, less informed boards, and less accountability and oversight of corporate management.

Transparency and investor protection are not only part of the SEC’s legal mandate, they are key elements of a well-functioning capital market. Transforming the U.S. system into one that arbitrarily and autocratically shuts out shareholders — contrary to the SEC mandate, but frankly consistent with the Trump administration’s arbitrary and autocratic dismissal of all other legal rights — is a surefire way to destroy confidence in U.S. markets.