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Statement on Proposed Amendments to Rule 14a-8

July 13, 2022

Today, the Commission will consider proposed amendments to Rule 14a-8 that would provide greater certainty as to the circumstances in which companies are able to exclude shareholder proposals from their proxy statements. I am pleased to support the proposed amendments because, if adopted, they would improve the shareholder proposal process.

When shareholders buy stock in a public company, they own a piece of the company, which comes with certain rights under state law. That includes the right to elect directors to the company’s board and the right to make proposals to the management team for consideration by fellow shareholders.

This aspect of shareholder democracy is not new. In the Securities Exchange Act of 1934, Congress included provisions about shareholder participation in the proxy process. For decades, there have been debates about which shareholder proposals must be included in the proxy for consideration by other shareholders and which can be excluded.

We first adopted a version of what is now Rule 14a-8 in 1942, and it has been amended from time to time since. In 2020, the SEC addressed separate aspects of Rule 14a-8.

Currently, existing Rule 14a-8 outlines the 13 substantive bases in which companies may exclude shareholder proposals from their proxy materials. Today’s proposed amendments would revise three of those bases for exclusion. Specifically:

  • Under the current rule, a company can exclude a proposal that has been “substantially implemented.” The amendments would provide that a company has “substantially implemented” a proposal if the company has already “implemented the essential elements of the proposal”;
  • Under the current rule, a company can exclude a proposal that “substantially duplicates” another proposal. The amendments would further provide that a proposal “substantially duplicates” another proposal if it “addresses the same subject matter and seeks the same objective by the same means as” another proposal previously submitted to the company;
  • Under the current rule, a company can exclude a proposal that is a resubmission of a previous proposal that failed to meet required voting thresholds. The amendments would harmonize the definition of a resubmission with the “substantially duplicates” standard when applying the resubmission thresholds, thereby harmonizing terms within Rule 14a-8.

I believe these proposed amendments would provide a clearer framework for the application of this rule, which market participants have sought. They also would help shareholders exercise their rights to submit proposals for consideration by their fellow shareholders. I am pleased to support today’s proposal and, subject to Commission approval, look forward to feedback from the public.

I’d like to thank the staff for their hard work in making these important amendments, including:

  • Renee Jones, Michael Seaman, and Kasey Robinson in the Division of Corporation Finance;
  • Dan Berkovitz, Megan Barbero, Bryant Morris, Dorothy McCuaig, David Russo, and Joe Valerio in the Office of the General Counsel;
  • Lauren Moore, Andrew Glickman, and Olga Itenberg in the Division of Economic and Risk Analysis;
  • Ray Be, Terri Jordan, and Toyin Momoh in the Division of Investment Management;
  • Jeffrey Weiss in the Division of Enforcement; and
  • David Fernandez in the Office of the Chair.
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