Since the beginning of the year, the US Securities and Exchange Commission’s (SEC) Division of Corporation Finance staff (Corp Fin Staff) has issued several important statements and interpretations, including a Staff Legal Bulletin on shareholder proposals and multiple new and revised Compliance and Disclosure Interpretations. Given the pace and importance of these recent changes, it is critical that public companies be aware of the significant policy shift at the Division of Corporation Finance and the substance of the updated statements and interpretations. 

This is the third part of an ongoing series that will discuss recent guidance and announcements from the Corp Fin Staff. This installment will review the issuance of Staff Legal Bulletin No. 14M and what the policy changes brought by this new guidance may mean for shareholder proposals and more generally going forward.

Shareholder Proposals: Staff Legal Bulletin No. 14M

On 12 February 2025, the Corp Fin Staff issued Staff Legal Bulletin No. 14M (SLB 14M) addressing shareholder proposals under Rule 14a-8 of the Securities Exchange Act of 1934 (Exchange Act). SLB 14M rescinds Staff Legal Bulletin No. 14L (which in turn had rescinded Staff Legal Bulletins Nos. 14I, J, and K) and likely presents a significant change in how both the Corp Fin Staff and companies and proponents consider no-action requests and shareholder proposals. It is noteworthy that the Corp Fin Staff issued SLB 14M less than one month after the change in presidential administration, before the appointment of a new SEC chair, and at the height of the review by the Corp Fin Staff of shareholder proposal no-action requests during the current year’s proxy season.

A Brief History

Each year, Corp Fin Staff members review the large number of no-action requests that companies make under Exchange Act Rule 14a-8 in connection with shareholder proposals received for upcoming annual meetings. The Corp Fin Staff reviews each no-action request received and determines whether it finds a basis for the company to exclude the shareholder proposal from its annual meeting proxy statement. Several months after the proxy season has ended (and, prior to the issuance of SLB 14M, never while the Corp Fin Staff was at its busiest reviewing current year no-action requests), the Corp Fin Staff had frequently issued a Staff Legal Bulletin to provide guidance on specific matters that arose during the previous proxy season’s review of no-action requests.

In November 2021, the Corp Fin Staff issued Staff Legal Bulletin No. 14L (SLB 14L), which rescinded the three prior Staff Legal Bulletins issued in connection with shareholder proposals. Those three Staff Legal Bulletins primarily provided guidance on how the ordinary business and economic relevance exceptions would be applied by the Corp Fin Staff in connection with shareholder proposals that raised significant policy issues. SLB 14L changed that guidance framework and took the approach that a shareholder proposal that raised a significant policy issue may not be excluded even if the policy issue was not significant to the company or the applicable business fell below the economic relevance thresholds. SLB 14L was issued in November 2021 when a majority of the SEC commissioners and the SEC generally had a strong focus on environmental, social, and governance (ESG) matters. As discussed below, SLB 14M reversed the guidance in SLB 14L and indicates a policy shift away from ESG-related matters.

SLB 14M

The table below provides a high-level summary of the Corp Fin Staff’s guidance issued in SLB 14M: 

Impact of SLB 14M

Even though it was not a surprise that the Corp Fin Staff provided new shareholder proposal guidance, the timing of the issuance of SLB 14M was such that many companies had the opportunity to amend their no-action requests in response to the new guidance while shareholder proponents could not revise their proposals. The significance of the policy shift brought by the issuance of SLB 14M can be seen in a higher number of shareholder proponents withdrawing ESG-related proposals due, at least in part, to a diminished likelihood of a successful outcome with respect to the Corp Fin Staff’s review of the no-action request.

The Corp Fin Staff also found in several no-action requests after the issuance of SLB 14M that a proposal that implicated a significant policy issue sought to micromanage the company. Many of those shareholder proposals requested the company adopt a policy, issue or create a plan, or produce an impact assessment and highlights that shareholder proponents need to be crisper in proposals asking for such an action to be taken by a company. Additionally, the Corp Fin Staff found in a few no-action requests that the company had not explained whether the policy issue implicated by the shareholder proposal was significant to the company and, as a result, could not exclude the proposal from its proxy materials. This highlights the need for companies to make sure all aspects of the new guidance in SLB 14M are addressed in a no-action request.

Conclusion

As there are still many more no-action requests for the Corp Fin Staff to review under this new guidance, there is still more to be gleaned as to how the policy shift ushered in by SLB 14M will play out with respect to shareholder proposals and the overall operations of the Division of Corporation Finance. The timing of the issuance of SLB 14M demonstrates that the Corp Fin Staff will not necessarily keep with tradition when publishing new guidance. This highlights the need for companies to continue to stay on top of the new and revised guidance coming out of the Division of Corporation Finance and the SEC and be ready to respond to both anticipated and unexpected policy shifts.