Recent SEC Proposal Would Make it More Challenging for Companies to Exclude Shareholder Proposals from Proxy Materials

By Samantha Nussbaum, Dina Bernstein


On July 13, 2022, the SEC proposed amendments to the proxy rules that would narrow the basis on which companies may exclude shareholder proposals from their proxy statements.  The proposed amendments would make it harder for companies to exclude shareholder proposals based on the following three grounds: substantial implementation, duplication and resubmission.


Under applicable rules, if a shareholder proposal meets certain requirements, a company must include the proposal in its proxy materials.  Typically, when a company attempts to exclude a shareholder proposal, the company submits its rationale in the form of a no-action request from the Staff of the SEC’s Division of Corporation Finance (Staff).

The grounds for exclusion are meant to defend shareholders’ ability to be heard, while also deterring certain types of proposals, such as those related to matters deemed within the discretion of the company’s management.

During the 2022 proxy season, the Staff essentially overturned long-standing no-action letter precedent.  The proposed amendments would codify some of the Staff’s recent positions and limit three of the substantive bases otherwise relied upon by companies to exclude proposals.

Proposed Amendments

Substantial Implementation.  Currently a company may exclude a shareholder proposal that “the company has already substantially implemented.”  The proposed amendment allows for exclusion if the company has already “implemented the essential elements of the proposal.”  Under this approach, a company could exclude a proposal only if the company has implemented all of its essential elements. 

Duplication.  Currently a company may exclude a shareholder proposal that “substantially duplicates another proposal previously submitted to the company by another proponent that will be included in the company’s proxy materials for the same meeting.”  The proposed amendment creates a new test for determining what constitutes substantial duplication, providing that a proposal “substantially duplicates” another one if it “addresses the same subject matter and seeks the same objective by the same means.” 

Resubmission.  Currently a company may exclude a shareholder proposal that “addresses substantially the same subject matter as a proposal, or proposals, previously included in the company’s proxy materials within the preceding five calendar years” if the matter was voted on at least once in the last three years and did not receive sufficient shareholder support.  Under the proposed amendments, this exclusion would apply if a resubmission “substantially duplicates” a prior proposal, and, similar to the duplication exclusion explained above, the test for whether a proposal “substantially duplicates” another proposal would be if it “addresses the same subject matter and seeks the same objective by the same means.”  As a result, the duplication and resubmission standards would be aligned.


The SEC requested comments on the proposed rules by September 12, 2022.  FW Cook will track this development and provide updates upon subsequent rule-making. 

Samantha Nussbaum

 Samantha Nussbaum has consulted on behalf of public and private companies, compensation committees, and senior management on all aspects of executive compensation. Samantha’s consulting and legal background includes advising on executive compensation in the context of mergers and acquisitions, spin-offs, and initial public offerings; executive employment, severance, and change in control agreements; equity incentive plans; deferred compensation; and securities laws, including reporting and disclosure implications.

Dina Bernstein

Dina Bernstein has extensive experience advising on all aspects of executive compensation, working with companies on an ongoing basis, as well as in the context of mergers and acquisitions, spin-offs, initial public offerings, and other corporate events. Dina provides guidance to private and public companies across various industries regarding cash and equity incentive compensation arrangements, employment, severance and change in control agreements, overall compensation program design, pay governance practices, taxation, stock exchange listing requirements and securities regulation compliance.