Shareholder Proposals for No-Action Requests Expected in 2025 Proxy Season

Rule 14a-8 of the Securities Exchange Act of 1934 allows shareholders with minimal shares in a company to propose ideas that will be included in the company’s proxy statements for voting at annual meetings in 2025. The proposals submitted for the 2025 meetings mainly revolved around corporate governance, executive compensation, environmental/climate change, and social concerns.

Companies have the ability to exclude these shareholder proposals if they fail to meet specific procedural or eligibility requirements, or for one of the 13 substantive reasons outlined in Rule 14a-8. Typically, companies will seek approval from the Staff of the Division of Corporation Finance at the SEC to exclude these proposals.

In a surprising turn of events in the middle of the 2025 proxy season, the Staff issued Staff Legal Bulletin No. 14M (SLB 14M) on February 12, 2025. This bulletin revoked the guidelines established during the Biden era and addressed issues such as the “economic relevance” and “ordinary business” reasons for excluding proposals. It also clarified that guidelines for substantial implementation, duplication, and resubmission exclusions should align with previous SEC and Staff guidance rather than the proposed amendments to Rule 14a-8 in 2022.

Building on the success of companies in the previous season and buoyed by SLB 14M, there was an increase of about 35% in no-action requests submitted by companies in the 2025 season compared to the year before. Nearly 70% of these requests were granted, maintaining a similar success rate from 2024.

Companies found success in excluding proposals due to procedural defects, eligibility issues, proposals related to ordinary business, and those viewed as micromanaging the company. Notably, companies were more successful this year in excluding proposals based on substantial implementation, economic relevance, and proposals that were deemed false and misleading.

The most commonly used basis for excluding proposals was the “ordinary business” argument, with the Staff agreeing with over half of these claims. Examples included proposals concerning hospital food, worker safety, collective bargaining rights, and DEI programs. The Staff also highlighted that the significance of a policy issue to a particular company plays a role in whether it is considered ordinary business.

Moreover, there were instances where proposals regarding GHG emissions targets, casino policies, and harassment considerations were not excluded on micromanagement grounds. The line between micromanagement and permissible proposals remains blurred in certain cases.

Overall, companies were more successful this year in excluding proposals based on substantial implementation arguments, showing an upward trend from the previous year. Companies are advised to consider the new staff guidance and the increasing success rate of no-action requests triggered by substantial implementation, economic relevance, or false and misleading claims in upcoming proxy seasons.