On February 12, 2025, the Staff of the SEC Division of Corporation Finance released Staff Legal Bulletin No. 14M (SLB 14M), which addresses various aspects of the Rule 14a-8 shareholder proposal process. Going forward, public companies navigating proxy season will have more flexibility in excluding certain shareholder proposals, especially those related to environmental and social issues. Most notably, SLB 14M rescinds Staff Legal Bulletin No. 14L (SLB 14L), issued in 2021, which imposed a higher burden on public companies seeking to exclude shareholder proposals. SLB 14M also reinstates guidance that was previously rescinded by SLB 14L.

What SLB 14M Means for Companies

The new guidance highlights a significant shift in the SEC Staff’s approach to shareholder proposals under the Trump Administration. SLB 14M reasserts a more company-friendly approach and eliminates guidance that, in practice, led to an increase in shareholder proposals and fewer requests for no-action relief.

Looking back, under the now-rescinded SLB 14L, the SEC Staff imposed a series of restrictions on public companies attempting to disqualify shareholder proposals from going to a vote. The 2021 guidance tightened some exemptions and allowed the Staff to go beyond the enumerated exclusions to consider a proposal’s “broad societal impact” when deciding whether to grant an exemption request. Following its issuance, shareholder proposals, particularly those on environmental and social issues, surged, while the success rate for no-action letters declined.

Now, SLB 14M is expected to lower the threshold for excluding shareholder proposals, particularly under Rules 14a-8(i)(5) and (i)(7). Companies will now have more leeway in requesting no-action relief from the SEC Staff as the guidance for omitting certain proposals has broadened.

This new guidance comes at a time when many companies have already submitted no-action requests for 2025 annual meetings in which they set forth an argument under SLB 14L’s prior framework. However, companies that submitted no-action requests prior to the publication of SLB 14M do not need to resubmit. If a company wishes to raise new legal arguments in light of SLB 14M, it may still file a supplemental set of arguments. The SEC Staff will also consider the publication of SLB 14M to be “good cause” for companies making a late no-action request, as long as the legal arguments in the request relate to the new SEC Staff guidance.

A Brief Summary of the New Staff Guidance

As explained in more detail below, SLB 14M:

• Reinstates a company-specific approach to evaluating whether the subject matter of a shareholder proposal transcends ordinary business. The Staff will assess whether a specific policy issue raised in a proposal is significant to a particular company, rather than evaluating whether the proposal addresses issues with broad societal impact or universal significance. This approach allows a company to more easily exclude broad social policy shareholder proposals if the proponent does not establish that the issues are significant in relation to the company.
• Broadens the application of the micromanagement exemption by expanding the circumstances under which a proposal would be considered to micromanage a company. Therefore, companies will now have more flexibility in excluding certain proposals that require the company to adopt a specific method for implementing a complex policy.
• Refocuses the Staff’s “economic relevance” analysis. As a result, shareholder proposals that raise social and ethical issues must tie those matters to a significant effect on the company’s business, and the mere possibility of reputational or economic harm alone will not suffice. This change affords companies a greater ability to exclude proposals related to social and ethical matters unless they are significantly related to the company.
• Advises that companies submitting no-action requests under Rules 14a-8(i)(5) and 14a-8(i)(7) are not required to include an analysis from the board of directors regarding the significance of the policy issue raised in a shareholder proposal. However, a company may still provide a board analysis if it believes it would be beneficial.
• Provides additional guidance stating:
  • companies may exclude graphics or images from shareholder proposals if they make the proposal materially false or misleading;
  • companies no longer have to send a second deficiency letter to specifically identify proof of ownership defects that were already addressed in an initial deficiency letter;
  • the Staff’s views on the use of email confirmation receipts for submission of proposals, delivery of deficiency notices and responses; and
  • companies should adopt a plain meaning approach, rather than being overly technical, when interpreting the language of the proof of ownership letters.

In Light of SLB 14M, Companies Should Consider the Following

• Companies should consider revisiting the shareholder proposals they previously determined were not excludable under the old guidance and re-evaluate them in light of the new guidance.
• Companies should not feel the need to resubmit any no-action requests in light of SLB 14M unless they want to address new legal arguments. SLB 14M confirms that the Staff will apply SLB 14M when reviewing pending no-action requests.
• For companies that have not yet submitted no-action requests, even if the deadline has passed, consideration should be given to whether exclusionary arguments can be made in light of SLB 14M guidance, especially for proposals related to environmental or social issues.
• Companies should consider whether to re-engage with certain shareholder proposals. In light of SLB 14M, shareholder proponents may be more willing to engage and agree on a basis to withdraw their proposals, since the new guidance is more favorable to companies.

A Detailed Summary of SLB 14M

A Refresher on the Ordinary Business Exemption

Exchange Act Rule 14a-8(i)(7), often referred to as the ordinary business exemption, allows a company to exclude a shareholder proposal that “deals with a matter relating to the company’s ordinary business operations.” The policy underlying the ordinary business exemption rests on two key considerations. One is that it allows a company to exclude a shareholder proposal from a company’s proxy materials if the proposal deals with a matter that is “so fundamental to management’s ability to run a company on a day-to-day basis that they could not, as a practical matter, be subject to direct shareholder oversight.” However, shareholder proposals that pertain to ordinary business matters, but focus on a significant policy issue, cannot be excluded under this first consideration if they transcend the company’s day-to-day business matters. The other consideration is the micromanagement prong, which provides that a shareholder proposal should not seek to “micromanage” the company by probing too deeply into matters of a complex nature upon which shareholders, as a group, would not be in a position to make an informed judgment. SLB 14M does not upend this approach, but rather changes the Staff’s analysis of these considerations as they relate to no-action requests.

The Ordinary Business Exemption Under SLB 14M: A Return of the Company-Specific Approach and Broadened Micromanagement Exclusions

As explained above, the SEC Staff rests the ordinary business exemption on two considerations: the proposal’s “subject matter” and whether the shareholder proposal “micromanages” the company.

Under the “subject matter” consideration, SLB 14M rescinds and replaces the SLB 14L guidance with a company-specific approach.

Again, under the ordinary business exemption, shareholder proposals that deal with a company’s ordinary business matters can be excluded. But, shareholder proposals that focus on “sufficiently significant” policy issues that transcend ordinary business typically do not fall under the exemption. Traditionally, the SEC would consider the nexus between the policy issue and the company when determining whether the issue transcends ordinary business. 

SLB 14L had the effect of making it more difficult for companies to exclude certain social policy proposals by not requiring them to demonstrate their particular significance to the company’s business. Instead, the SEC Staff focused on whether the social policy proposal raised issues with broad societal impact, such that they transcended the ordinary business of the company, regardless of whether there was a direct connection between the policy issue and the particular company seeking to exclude the proposal.

The new SLB 14M guidance returns to a company-specific approach, where SEC Staff will evaluate significance based on the individual company, rather than focusing on whether a proposal raises an issue with broad societal impact. Essentially, companies will likely not have to include as many shareholder proposals in their proxy materials that raise issues of broad societal importance, such as environmental or ethical issues, unless there is a specific nexus between the issue and the company. The change broadens companies’ ability to exclude a wider range of shareholder proposals that address policy issues of societal significance only.

Under the “micromanagement” consideration, SLB 14M reinstates past guidance that is stricter on proposals that “micromanage” the company.

SLB 14M reinstates parts of several other SLBs, Staff Legal Bulletin Nos. 14I, 14J and 14K, that were overridden by SLB 14L. Under SLB 14L, the micromanagement exclusion had been interpreted more narrowly. SLB 14L took the approach that proposals seeking detail or seeking to promote timeframes or methods would not necessarily constitute micromanagement, so long as the proposals afforded discretion to management as to how to achieve such goals. For example, proposals that requested companies to adopt timeframes and targets for addressing climate change were not excludable if they allowed management the discretion to achieve these targets.

The reinstated guidance, under SLB 14M, takes a much stricter approach in favor of companies and will evaluate whether the shareholder proposal “involves intricate detail, or seeks to impose specific timeframes or methods for implementing complex policies,” such as a proposal that seeks an intricately detailed study or report. Therefore, a proposal may be excludable if it prescribes specific actions without providing the company enough flexibility or discretion to address the issue. SLB 14M also confirms that the micromanagement standard can apply to proposals addressing executive compensation or corporate governance topics.

Revitalizing the Economic Relevance Exemption Under Rule 14a-8(i)(5)

SLB 14M now requires a shareholder proposal that raises social and ethical issues to demonstrate its significance to the company, otherwise, it may be excluded. The analysis is now dependent on the specific circumstances of the company to which the proposal is submitted.

Economic relevance, under Rule 14a-8(i)(5), is another basis for the exclusion of shareholder proposals. It permits a company to exclude a proposal that “relates to operations which account for less than 5 percent of the company’s total assets at the end of its most recent fiscal year, and for less than 5 percent of its net earnings and gross sales for its most recent fiscal year, and is not otherwise significantly related to the company’s business.” Historically, the SEC Staff and courts have interpreted this rule as not allowing for the exclusion of a proposal related to social and ethical issues, regardless of its economic relevance to the company, and as a result, this rule has been infrequently used.

SLB 14M redirects the focus on Rule 14a-8(i)(5) and the shareholder proposal’s significance to the company’s business. Under SLB 14M, the analysis is now viewed as “dependent upon the particular circumstances of the company to which the proposal is submitted.” The SEC Staff explains that a matter significant to one company may not be significant to another. Thus, if a proposal’s significance to a company is not apparent on its face, the proposal may be excludable unless the proponent demonstrates that it is “otherwise significantly related to the company’s business.” However, the SEC Staff generally views substantive governance matters as significantly related to most companies.

Additionally, the mere possibility of reputational or economic harm alone will not demonstrate that a proposal is “otherwise significantly related to the company’s business.” In evaluating whether a proposal is “otherwise significantly related to the company’s business,” the SEC Staff will now consider the proposal in light of the “total mix” of information about the company.

This exclusion is also viewed as more favorable to companies because it allows shareholder proposals on social and ethical issues related to operating, which account for less than 5 percent of total assets, net earnings and gross sales, to be more easily excluded, unless the proponent can demonstrate its particular significance to the company’s business.

No Requirement for Board Analysis Simplifies No-Action Request Preparation

SLB 14M also confirms that the SEC Staff will not expect a company’s no-action request to include a discussion of the board’s analysis of whether a particular policy issue is significant to the company when arguing for exclusion of a shareholder proposal under Rule 14a-8(i)(5) and/or Rule 14a-8(i)(7).

The prior SLBs had encouraged companies seeking to exclude proposals under Rule 14a-8(i)(5) or Rule 14a-8(i)(7) to include a discussion in their no-action requests setting forth an analysis by the company’s board of directors as to whether or not the particular issue raised by a shareholder proposal was significant to the company’s business.

Under SLB 14M, preparing a no-action request will be simpler for companies, as the SEC Staff will no longer expect a no-action request to include a discussion reflecting the board’s analysis. While companies are still permitted to submit such an analysis, it is no longer required.

Additional Topics Addressed by SLB 14M

SLB 14M also provides further guidance on several other shareholder proposal topics, including the following:

• Shareholder proposals may contain graphics or images, and their exclusion may be appropriate if: (1) images make the proposal materially false or misleading; (2) the images used in the proposal would make it inherently vague or indefinite; (3) images would impugn the character, integrity or personal reputation of someone without a factual basis; (4) the images are irrelevant to a consideration of the proposal’s subject matter; or (5) the total number of words in a proposal (plus the words in any graphics) exceed 500 words.
• Companies are not required to send a second deficiency notice if the company previously sent an adequate deficiency notice and believes the proponent’s response to the initial deficiency notice contains a defect.
• Proponents and companies should request acknowledgment from the recipient to confirm the receipt of emails for submitting shareholder proposals, sending deficiency notices and responding to deficiency notices. The SEC Staff encourages both parties to provide such confirmation replies.
• Companies should avoid an overly technical interpretation of proof of ownership letters and instead adopt a plain meaning approach to understanding the language of the letters. However, proponents must still provide clear and adequate evidence of their eligibility to submit a shareholder proposal.