The Securities and Exchange Commission (SEC), under the direction of its Acting Chairman, has rescinded Staff Legal Bulletin 14L (SLB 14L) and introduced Staff Legal Bulletin 14M (SLB 14M), revising the framework governing the exclusion of shareholder proposals from proxy statements.
This mid-season policy change introduces new criteria for excluding shareholder proposals, impacting areas such as executive compensation, corporate governance, artificial intelligence, political expenditures, and environmental matters. The decision has raised concerns regarding regulatory consistency, shareholder rights, and broader implications for corporate democracy.
Implications for Shareholders and Corporations
SLB 14M modifies the standards by which companies may seek to exclude shareholder proposals, potentially limiting the range of topics that reach a shareholder vote. This adjustment places additional burdens on issuers and investors, as corporations may need to revise no-action requests, while shareholders—who have already submitted proposals under prior guidelines—will not have the opportunity to amend their filings.
Corporate governance experts note that mid-season adjustments of this nature can create uncertainty, increased costs, and disparate treatment of proposals, particularly when SEC staff have already issued no-action letters for the 2024 proxy season.
Regulatory and Market Considerations
The rescission of SLB 14L and issuance of SLB 14M underscores the SEC’s evolving approach to shareholder engagement and corporate governance. While the SEC maintains that SLB 14M restores previously established regulatory interpretations, stakeholders have raised concerns about the timing and procedural consistency of this shift.
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