Securities Regulation Daily Wrap Up, PROXIES—Atkins remarks may not be death knell for precatory proposals, panelists say, (Nov 10, 2025)

By John Filar Atwood

Stakeholders are debating the likely impact of the SEC Chair’s speech inviting a challenge to non-binding shareholder proposals under Delaware law.

Suggestions that non-binding shareholder proposals may go away altogether in the wake of SEC Chair Paul Atkins’ statement that such proposals may not be valid under Delaware law are premature, according to panelists at Practicing Law Institute’s conference on securities regulations. Nonetheless, they agreed that it bears watching to see if a company will walk through the door that Atkins has opened.

Atkins’ remarks. In a recent speech, Atkins stated his view that there may be no fundamental right under Delaware law for a company’s shareholders to vote on precatory proposals. He identified environmental and social proposals as a particular problem in the proxy process, noting that they burden companies but receive very little shareholder support.

He then laid out a path for companies to exclude such proposals saying that if a company seeks to exclude the proposal on the grounds that it is not a proper subject for action under Delaware law, and obtains an opinion of counsel stating as much, “this argument should prevail, at least for that company.” He added “I have high confidence that the SEC staff will honor this position.”

Panelists agreed that the speech was remarkable for its specific invitation to challenge non-binding proposals combined with the chair’s tacit assurance that the Commission would look favorably on such a move.

“We didn’t think this was a path we could take,” said Ian Nussbaum of Latham & Watkins, noting that Rule 14a-8 explicitly says that precatory proposals are proper under state law.

None of the panelists expect to see immediate movement on the issue. “You have to have a company that is willing to submit the proposal, having obtained an opinion from a Delaware law firm,” noted Paul Washington, president and CEO of the Society of Corporate Governance. “Then we’ll likely see an opposing opinion submitted by the proponent, the SEC’s decision on whether the proposal is excludable, followed by consideration by the Delaware Supreme Court. There are a lot of parts to this,” he said.

Higher stakes. Morrison & Foerster’s Ryan Adams pointed out that there are much higher stakes involved than the typical shareholder proposal. “The company that submits the proposal will be expected to show up and argue the case before the Delaware Supreme Court. They will be in the spotlight and in the news,” he stated. He thinks eventually a company may be willing to go through the process but for now he expects companies to take a wait-and-see approach.

John Mark Zeberkiewicz, a partner at the Delaware firm Richards, Layton & Finger, stated that the question boils down to whether there is a vested right to bring the precatory proposals under Delaware law. “Just because the Delaware General Corporation Law does not specifically allow it, does that mean it is prohibited? That is the question that needs to be answered,” he said.

Right now, he thinks Richards, Layton & Finger will “sit on the sidelines” and not issue an opinion on the matter. However, he acknowledged that there probably are Delaware firms that will write an opinion in either direction on the issue.

Kier Gumbs, general counsel with Edward Jones, does not think that precatory proposals will go away. “It won’t take just one case. It will take a critical mass of companies wanting this,” he said. He conceded that there is an appetite for getting rid of precatory proposals but added that there also is some resistance. “It will take costly litigation to resolve, and I’m not sure what companies will be willing to take on that cost,” he said.

Stay the course. In the future, Rule 14a-8 may be a very different law, according to Wilmer Hale’s former Corporation Finance Division director Meredith Cross. For now, though, she advised companies and their counsel to continue their existing approach to shareholder proposals.

“The Commission is looking at no-action requests with a refreshed lens,” she said, “and I think there is a clear message that companies should be bold in their arguments for exclusion.” Dealing with precatory proposals is a major priority for Chair Atkins given the sense that shareholder proposals are being used in a way that is not helpful to shareholder value, she added.

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