Governance

Manufacturers ask SEC to slow Rule 14a-8 repeal as CalPERS urges it be withdrawn

Companies and pension investors split on scrapping the SEC’s shareholder-proposal rule, but both warn the shift to state law would bring costly litigation.

UAO Editorial November 1, 2026 3 min read
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On 29 October the National Association of Manufacturers (NAM) told the Securities and Exchange Commission that its plan to rescind Rule 14a-8, the federal rule that governs when companies must include shareholder proposals in their proxy materials, needs a slower and more orderly transition. NAM welcomes the Commission’s “evolving views on shareholder proposals” but warned that rescission “will inspire a surge of ‘last chance’ proposals during the 2027 proxy season”. It asked the SEC to resume no-action letters for 2027 filings and either to delay the effective date if Delaware and Nevada have not legislated or to set 1 July 2028 as the start date.

The letter joins a sharper objection from the California Public Employees’ Retirement System (CalPERS). In a letter dated 23 October and signed by its chief executive, Marcie Frost, the largest US public defined-benefit fund, which manages about $650bn for nearly 2.4m members, “respectfully urges the Commission to withdraw its proposed rescission of Rule 14a-8”. “Abandoning a unified federal standard will result in a patchwork of state laws and individual company bylaws,” it wrote. Comments are due by 20 November.

What the SEC has proposed

The proposal, Release No. 34-106383, was published in the Federal Register on 21 September. It would rescind Rule 14a-8 and “leave determinations about the role of shareholder proposals to State law and company governing documents”. It would also amend Rule 14a-4 to widen the circumstances in which a company may use discretionary voting authority on proposals left out of its proxy materials, while letting shareholders opt out for their own shares. According to NAM, SEC staff said in August that they would no longer provide Rule 14a-8 no-action letters, and only Texas has so far passed a specific law on investors’ eligibility to file proposals.

Why it matters for large asset owners

For a diversified fund, the federal rule works as shared infrastructure. Without it, CalPERS argues, an investor of its kind “would need to track potentially all 50 state legal regimes and the governing documents of thousands of portfolio companies”. Disputes would move from an administrative process to state courts, and because boards can generally amend bylaws without shareholder approval, companies could set and change the terms of access themselves. Shareholders would generally have to fund their own proxy solicitations, which CalPERS calls “impractical for most investors”. The fund also argues that the formal process is what makes informal engagement effective, since many proposals are withdrawn after companies agree to address the concern.

That is the stewardship point for pension and sovereign portfolios. Engagement that rests on the credible option of a ballot vote would lose leverage, while the cost of monitoring rises with every additional legal regime. CalPERS also objects that the Rule 14a-4 changes would let management vote proxies on proposals that other shareholders “never saw in the company’s proxy materials”. The near-term battleground is company bylaws. NAM expects proponents to file “hundreds of proposals”, including private-ordering resolutions that ask companies to write Rule 14a-8-style rights into their governing documents, and says Microsoft, Oracle and P&G are among the companies that have received them.

Companies see the costs differently. NAM says the proxy process has been “hijacked by a cadre of professional shareholder proponents”, and cites a Weinberg Center survey in which a majority of corporate respondents reported spending more than $100,000 a year on proposals, about 25% at least $500,000 and 11% more than $1m. Yet the two camps agree on one risk. NAM counts at least six proposal-related lawsuits last season, and the SEC’s own release, as quoted by NAM, says the transition “may also be associated with elevated litigation costs”. CalPERS likewise expects the shift to “generate significantly more litigation”.

What to watch

The comment period closes on 20 November. Delaware and Nevada, which NAM says account for “the lion’s share of public company incorporations” alongside Texas, would need to legislate, and NAM doubts they can do so before the spring 2027 proxy season. The volume of “last chance” filings in that season, and whether the SEC accepts NAM’s 1 July 2028 start date, will show how quickly stewardship by large asset owners has to adapt.

Sources

GovernanceStewardshipCalPERS
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