Shareholder Rights Skirmish: Investor Group Lambasts Congressional Interference

23 September 2025

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By Jack Grogan-Fenn

Investor association the Shareholder Rights Group has submitted comments criticising the recent House Committee on Financial Services proxy advisor-focused hearing and its potential impact on shareholder rights.

The “Proxy Power and Proposal Abuse: Reforming Rule 14a-8 to Protect Shareholder Value” hearing by the Republican-run committee showcased a pipeline of proposed regulation seeking to significantly restrict shareholder rights and marked the latest salvo in a swathe of attacks on corporate governance, as reported by Minerva Analytics.

In the letter sent to French Hill, the committee’s Republican Chairman, and Maxine Waters, the Democrat Ranking Member, the Shareholder Rights Group stated that “at its core, the shareholder proposal process is simply a mechanism for the owners of public companies to evaluate and aggregate concerns about potentially material risks with the companies they own”. It added that “far from being a politicised activity, it reflects the work of fiduciaries and financial professionals who are obligated to protect shareholder value and who are using a well-established tool for market oversight”.

“Shareholder proposals do not dictate corporate decision-making; they facilitate the flow of information and signal emerging risks that the market itself is already assessing,” the letter read. “It is unclear why Congress would interfere with this private, market-based system that investors rely on. It is the only tool that gives companies insight into the concerns of its entire investor base, without committing the company to action.”

As highlighted in the groups’ comments, shareholder rights in the US have suffered significant setbacks this year. As reported by Minerva Analytics, amendments to the Securities and Exchange Commission’s (SEC) 14a-8 rule, which governs the filing of shareholder proposals, mean shareholders must have invested a minimum of U$25,000 in a company for a year to file a proposal at an AGM. This marks a significant increase in the investment requirements, with the prior regulation permitting investors to submit proposals if they owned U$2,000 or 1% of a company’s securities for at least 12 months.

The rules also sought to raise the level of shareholder support required to resubmit a proposal which had been voted down at an AGM. The new regulation means proposals now must receive at least 5% of votes from investors to be refiled, an increase from the previous threshold of 3%.

The rules were adopted in November 2020, at the very end of the Donald Trump’s first spell as US President, and came into effect in January 2021. However, litigation over the procedure under which the rules were passed since June 2021 had seen their full implementation delayed.

Several investors sued to overturn the rule in June 2021, namely NGO As You Sow, shareholder engagement-focused investor membership organisation the Interfaith Center on Corporate Responsibility (ICCR), and CorpGov.net’s Founder James McRitchie. As You Sow, ICCR and McRitchie are among the Shareholder Rights Group’s activist investor members, which also include Arjuna Capital, Ceres, John Chevedden and Trillium Asset Management.

In February, the SEC rescinded Staff Legal Bulletin (SLB) 14L, replacing it with new guidance in SLB 14M. The new guidance reinstated prior staff guidance on micromanagement, permitting shareholder proposals to be excluded more easily by companies. This change saw a surge in ‘no action’ appeals, preventing proposals being voted on by shareholders at the AGMs of investee companies. The Shareholder Rights Group and ICCR were among a coalition of investors that sent a letter to the SEC urging it not to replace SLB 14L.

The recent House Committee hearing scrutinised Rule 14a-8 under the Securities Exchange Act of 1934, purporting to assess whether the shareholder proposal process has been “co-opted by activist investors who prioritise narrow policy goals over maximising shareholder value” rather than providing all shareholders with voice in company oversight as “originally designed to”.

Sanford Lewis, Director and Founder of the Shareholder Rights Group, said that some members of the committee were “knowledgeable” and that minority witness Brad Lander, Comptroller of the City of New York had made a “valiant effort to debunk the witnesses presented by the Republican majority”. However, he added that “in our view the full presentation of the committee presented a dangerously lopsided characterization of the shareholder proposal process”.

Four expert witnesses testified at the hearing: James Copland, Senior Fellow and Director of Legal Policy at the Manhattan Institute; Ferrell Keel, Partner at Jones Day; Ronald Mueller, Partner at Gibson Dunn & Crutcher; and New York’s Lander.

Three of these witnesses – Copland, Keel and Mueller – spoke critically about Rule 14a-8, proxy advisors and shareholder proposals in their current form. Additionally, no witnesses from proxy advisors were called to provide evidence at the hearing.

“The shareholder proposal process is the only tool that gives all investors a voice on long-term risks and opportunities that boards might otherwise dismiss,” the letter read. “To argue otherwise is to shield corporate leadership from precisely the investor oversight that securities laws were designed to protect.

“Preserving the shareholder proposal process strengthens capital markets helps companies address material risks before they escalate, and ultimately enhances both shareholder and corporate value,” it added. “Congress should not weaken a safeguard that improves transparency, accountability, and the long-term health of our economy.”

As well as repealing shareholder rights, right-wing regulators and politicians engaged in a high-profile campaign against proxy advisors. Texas and its Attorney General Ken Paxton have been at the forefront of this assault, as reported by Minerva Analytics, with its Senate Bill (SB) 2337 aiming to restricting proxy advisory services and investor choice on a worldwide basis.

The law was due to come into effect on September 1, but a preliminary injunction was granted by a Trump-appointed Republican judge in the state following lawsuits from two major proxy advisors. A trial is now set for February 2, 2026.

This month, Paxton also launched a new investigation into two major proxy advisors, accusing them of “potentially misleading institutional investors and public companies”, as reported by Minerva Analytics.

Minerva Analytics last week filed a Texas Public Information Act (TPIA) request (Freedom of Information request) with the Texas Attorney General following a series of escalating legal moves surrounding SB 2337.  Minerva’s TPIA request seeks disclosure of communications between the Attorney General’s office, the Texas Stock Exchange, and related parties concerning proxy advisory services and SB 2337. The objective is to clarify whether coordination has occurred and to safeguard investors’ right to independent analysis free from political interference.

“This is not just a dispute about two firms. SB 2337 strikes at all independent research providers and at the investor choice that underpins fiduciary duty, said Sarah Wilson, CEO of Minerva Analytics. “Placing political conditions on how research is produced or accessed is an attack on the freedom of expression in financial analysis and risks fragmenting oversight of US markets.

“Minerva is doing this to defend investor choice and the freedom of expression essential to independent investment research,” she added. “If allowed to succeed, SB 2337 would set a damaging precedent: state-level political controls over commercial speech, reduced investor choice, and a patchwork of conflicting rules that would encroach on the SEC’s established federal authority,”

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Last Updated: 23 September 2025