Securities Regulation Daily Wrap Up, CORPORATE GOVERNANCE—Panelists at IAC meeting dive into corporate governance regulatory reforms, (Dec 4, 2025)

By Rebecca E. Hoffman, J.D.

Panelist Nell Minow compared the current landscape to a “whack-a-mole” game, with threats to shareholder rights and access “coming at us on all sides.”

A panel discussion at the SEC’s Investor Advisory Committee (IAC) meeting Dec. 4 examined the SEC’s recent policy changes in the corporate governance space that could impact how shareholders express their opinions to issuers, how boards act in response, and investors’ continued participation in markets in general.

In remarks preceding the panel, Commissioner Caroline Crenshaw said that these changes represent a “seismic shift in the corporate government landscape happening right under our feet.”

James Andrus, chair of SEC’s Investor as Purchaser Subcommittee of the IAC, who moderated the panel, listed the issues:

• The SEC’s policy statement that effectively permits public companies to mandate arbitration over securities disputes, potentially reducing class action litigation, but also potentially limiting investors’ ability to seek relief

• SEC’s Division of Corporation Finance’s announcement that it will not respond to no-action requests on companies’ plans to exclude shareholder proposals under Rule 14a-8 in many cases, indicating that companies may be able to exclude more proposals

• ExxonMobil’s voting program that permits retail shareholders to opt in to have their shares voted automatically with the board, given the SEC’s nod with a no-action letter

• A debate over whether Delaware law permits or restricts shareholders from submitting precatory proposals

‘Overwhelming assault.’ Adrus asked Nell Minow, chair of ValueEdge Advisors, to provide the perspective of governance advocates. These changes are an “overwhelming assault on shareholder rights,” Minow said, encouraging the attendees to remember to look at the big picture. Shareholder proposals are limited to strategic and governance issues, and regulators should not be the ones to determine what issues are material, she said. Shareholders will react to proposal restrictions by casting more votes against boards, and purposeful avoidance of meetings to deny the company a quorum, she said.

Brad Goldberg, partner and co-head of Cooley LLP’s corporate governance and securities regulation practice, said that these reforms do not signify the end of corporate governance and shareholder democracy. “Shareholder proposals are only one lever in the corporate governance landscape,” he said, noting that social and political proposals are a “costly distraction,” and not Rule 14a-8’s purpose. Goldberg predicts that we will see more shareholder proposals, not fewer.

When asked about the value of environmental and social proposals, Goldberg said that non-governance proposals “muddy the landscape,” but Minow said the shareholders should determine what is relevant. Séverine Neervoort, global policy director of International Corporate Governance Network, noted that shareholders support proposals that “catalyze improvements in governance.”

The IAC must work to prevent the erosion of shareholders’ rights, Neervoort remarked. She observed that SEC staff guidance has provided procedural clarity in the past, and the decision not to respond to 14a-8 no-action requests will reduce shareholder influence and upset corporate checks and balances. “We strongly encourage the commission to consider returning to public consultation processes on matters that substantively affect policy,” or risk making U.S. capital markets less attractive.

James McRitchie, publisher of CorpGov.net, added that “the SEC should focus on amplify[ing] the voice of ordinary shareholders.” He pointed out that the Rule 14a-8 threshold limits the proposal process to the “economic elite,” and now the SEC is planning to raise it.

Creative solutions. For index funds, or other large institutions, perhaps there is a way to survey retail investors to determine where their interests lie, and then select issues on which to conduct a pass-through vote, suggested John Coates, professor of law and economics and deputy dean at Harvard Law School. This might be complicated but it would be preferable to index funds voting between 20 and 30 percent of all shares or the opposite extreme of taking away their votes, he said.

Goldberg believes the ExxonMobil no-action letter enfranchises investors by making it easier for them to vote, but McRitchie said—referring to companies he owns—“management is not always right" at any of them. Brian Schorr, chair of the IAC and a partner at Trian Fund Management, LP, suggested that if shareholders had a way of voting in advance, this would increase participation. Coates said voting should be possible with a “couple of clicks” and the SEC should steer institutions in that direction. Schorr, Minow, and Coates agreed that technology obviates the need for an intermediary to reach out to shareholders.

Institutional investors. Adrus asked about institutional investor engagement, and Elizabeth Bieber, partner and head of shareholder engagement and activism defense at Freshfields, said that such investors do not have the need for precatory proposals, but instead use “enforcement mechanism[s] that will change the operations and the governance of a company without putting it to all shareholders.” But engagement has been muted of late, due to SEC guidance making reporting requirements more onerous. Neervoort called on the SEC to clarify the situation.

“Some things that look like they're not rulemaking actually will be rulemaking if challenged in court,” Coates said, noting that the SEC guidance has an exclusion for proposals that are “not a proper subject” under state law. Thus, the type of proposals that have passed muster for years might suddenly be deemed improper, and this can be challenged successfully, he said.

When asked about the ability to mandate arbitration, Goldberg said that companies would be interested, but it is not permitted under the Delaware Corporate Code. Coates noted that the Cayman Islands has been an option for the past 30 years, but companies are not opting to incorporate there in order to have the arbitration clause. Neervoort would recommend that the SEC scrutinize arbitration provisions during registration to protect investors.

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