THE SEC’S SHAREHOLDER PROPOSAL 

RULE: CREATING A CORPORATE PUBLIC 

SQUARE 

James D. Cox and Randall S. Thomas 

In this Article, we take advantage of this Symposium’s 

goals to think broadly about the future of Rule 14a-8 of the 

Securities Exchange Act of 1934, the shareholder proposal 

rule. We set forth a vision for the rule to address boardroom 

insularity by likening the shareholder proposal rule as the 

public square for shareholders. The existence of such a forum 

would redound to the benefit of investors, officers, and boards 

of directors as a fount of current and useful information about 

their investors’ and stakeholders’ concerns. 

We therefore rethink the mission of Rule 14a-8. In doing so, 

we explore whether it can provide a ready-made corporate 

public square for all companies; that is, rather than view Rule 

14a-8 as purely enabling shareholders to sample the beliefs of 

their fellow shareholders, we perceive a broader social value. 

We cast Rule 14a-8 as a mechanism for assisting corporate 

directors generally, meaning not just those on the board of the 

corporation that is the target of a proposal, but also directors 

at all corporations, in gathering valuable information to help 

them better perform their duties. 

In making these claims, we fully accept the functional view 

that Rule 14a-8 addresses itself to shareholders facing high 

barriers to their efforts to communicate with their directors 

 

 James D. Cox is the Brainerd Currie Professor of Law at Duke University; 

Randall S. Thomas is the John S. Beasley II Chair in Law and Business at 

Vanderbilt University Law School and Professor of Management at 

Vanderbilt University, Owen Graduate School of Business. The authors are 

grateful for the valuable comments received at the conference sponsored by 

the Columbia Business Law Review and Columbia Law School, as well as the 

useful research of Katlynn Bruce, Linyang Wu, and Yao Lin of the Duke 

School of Law. 

 



  

1148 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 

and among themselves by providing them with an inexpensive 

vehicle for making their views known. We also believe it is 

equally important to understand that the message derived 

from proposals, and the votes they garner, is also heard by 

managers of other companies. We see that the temperature 

being taken through Rule 14a-8 is not just that of the 

proponent but a broad group of the company’s stockholders 

that likely is reflective of societal beliefs. 

Construing Rule 14a-8 to facilitate a public square will 

weaken the social and psychological forces that can insulate 

management and the board from alternative perspectives 

regarding the firm’s objectives. Board directors often live 

cloistered lives and naturally identify with the firm’s successes 

and the operating practices. Thus, as their length of service 

increases, directors risk failing to broaden their perspectives to 

reflect the constellation of views held by the shareholders. 

Overall, a public square could help directors preserve and even 

gain a far richer and aligned perspective. 

Moreover, as opposed to one-off meetings with portfolio 

companies, voting on shareholder proposals provides both the 

chance to discern the views of other financial institutions and 

the opportunity to present a cohesive voice across a group of 

investors behind a recommended course of action set forth in a 

proposal. 

To be sure, some conditions should be imposed on 

proponents to guard against abusive proposals. We review the 

data bearing on the extent that a small group of investors, so-

called “gadflies,” produce a disproportionate number of the 

poorly tailored proposals and hence are a distraction, and we 

believe that the SEC should study whether their proposals are 

associated with negative returns. 

We conclude that recent SEC amendments to Rule 14a-8 are 

ill-advised. In making these changes, the SEC assessed the 

value of Rule 14a-8 by narrowly focusing on votes garnered by 

proposals. We argue the worth of this rule has many more 

features than the outcome of the votes cast in favor of a 

proposal. 

 

 



  

No. 3:1147] CREATING A CORPORATE PUBLIC SQUARE 1149 

I. Introduction ...................................................................... 1149 
II. Overview Of Rule 14a-8 ................................................. 1162 
III. The Mechanics, Legislative-Regulatory History, and 

Commentary of Rule 14a-8 ........................................... 1166 
A. Qualifying the Proposal ........................................ 1169 
B. Legislative History, Regulatory Evolution and 

Judicial Development of Rule 14a-8 ................... 1172 
C. Analysis of the Legislative History and Policy 

Justifications for Rule 14a-8 ................................ 1181 
1. Legislative History Debate ............................ 1181 
2. Theoretical and Policy Arguments ................ 1184 

IV. Insights from Empircal Studies of Rule 14a-8 ............ 1187 
V. What is the Real Purpose of Rule 14a-8? The Corporate 

Public Square ................................................................. 1193 
VI. Conclusion ...................................................................... 1197 
 

I. INTRODUCTION 

Corporate law is once again at an important crossroad. 

Institutional and individual investors now evince a growing 

and animated interest in environmental, social, and 

governance (ESG) issues that is also mirrored by firm 

managers’ public statements regarding the focus of their 

stewardship.1 At the same time, an aging American workforce 

financially ill-prepared for retirement is seeking increased 

economic returns from the funds on which their retirements 

 

1 See, e.g., José Azar et al., The Big Three and Corporate Carbon 

Emissions Around the World, 142 J. Fin. Econ. 674, 674–75 (2021) (noting 

how the largest institutional investors increasingly engage with firms on 

issue of high CO2 emissions); Michael Barzuza, Quinn Curtis & David H. 

Webber, The Millennial Corporation (Dec. 14, 2021) (unpublished 

manuscript), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3918443 

(on file with the Columbia Business Law Review) (marshalling evidence and 

arguments that the growing influence of millennials will propel a dramatic 

shift within the executive suites toward stakeholder interests and socially 

responsible choices so that traditional obeisance to wealth maximization 

will be reduced). 



  

1150 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 

depend.2 Hence, the pursuit of gain, not good, is the other fork 

in the road. 

Caught in the middle of these intersecting forces are firm 

managers—board members and officers—who are challenged 

to address both sets of concerns. The path forward, however, 

is confounded by the diverse nature of firms seeking to 

traverse this intersection—American public companies cover 

an enormous range of industries, employees, shareholders, 

debtholders, customers, and suppliers, in a wide variety of 

geographic areas of operation. Indeed, public companies 

impact, and are impacted by, a broad range of investors and 

other stakeholders. As such, their directors face the challenge 

of obtaining good information regarding the aspirations, 

values, and needs of their investors and stakeholders, 

particularly with regard to the managers’ stewardship of the 

firm as well as the directors’ level of accountability.3 Boards 

of directors depend heavily on corporate management for this 

information, which may leave them unaware of various 

stakeholders’ beliefs and needs4 or simply poorly focused on 

shareholders’ concerns; they may also not be aware of smaller 

shareholders views due to their significant collective action 

problems and steep communication barriers.5 All these issues 

 

2 Stephen F. Befort, The Perfect Storm of Retirement Security: Fixing 

the Three-Legged Stool of Social Security, Pensions, and Personal Savings, 

91 MINN. L. REV. 938, 938–39 (2006) (describing the looming American 

retirement crisis). 
3 DAVID M. SILK, SABASTIAN V. NILLES & CARMEN X. W. LU, WACHTELL, 

LIPTON, ROSEN & KATZ, ESG AND SUSTAINABILITY: KEY CONSIDERATIONS FOR 

2021 (2021), 

https://www.wlrk.com/webdocs/wlrknew/ClientMemos/WLRK/WLRK.2733

2.21.pdf [https://perma.cc/UP6L-TVND] (“As investor and stakeholder 

scrutiny of ESG continues to accelerate, boards will also continue to face 

heightened expectations on their oversight of ESG.”). 
4 James D. Cox & Randall S. Thomas, Resisting the Return to 

Managerialism: Institutionalizing the Shareholder Voice in the Monitoring 

Model, 99 TEX. L. REV. 1275 (2021) (discussing boards’ lack of independent 

sources of information and need for alternative information flows in order 

to be well informed). 
5 See Paul H. Edelman, Randall S. Thomas & Robert B. Thompson, 

Shareholder Voting in an Age of Intermediary Capitalism, 87 S. CAL. L. REV. 



  

No. 3:1147] CREATING A CORPORATE PUBLIC SQUARE 1151 

exist at a time when major companies’ boards of directors are 

increasingly and aggressively seeking input from their 

shareholders on their wide-ranging beliefs and concerns.6 

Social-psychological forces further complicate the 

balancing act required of today’s directors of public 

companies.7 Studies reflect that since the last major change 

in corporate governance—the movement from managerialism 

to the share-value centric objective pursued by officers under 

the watchful eye of an independent board of directors— an 

inverse relationship has evolved between the tenure of officers 

and board member independence.8 With greater board 

independence, the average tenure of directors has increased.9 

In fact, the average tenure of directors exceeds that of chief 

 

1359, 1370, 1379, 1384 (2014) (discussing shareholders’ collective action 

problems in voting). 
6 For example, Unilever recently voluntarily instituted an advisory 

shareholder vote on climate change issues. See Sabira Chaudhuri, Unilever 

Allows Climate Input, WALL ST. J. (Dec. 14, 2020, 1:43 PM), 

https://www.wsj.com/articles/unilever-to-give-investors-advisory-vote-on-

climate-change-plan-11607971421 (on file with the Columbia Business Law 

Review). In addition, “[m]ajor investors are putting more emphasis on 

addressing the threats posed by climate change, with shareholder 

resolutions on the issue becoming more common.” Id. 

7 See James D. Cox & Harry L. Munsinger, Bias in the Boardroom: 

Psychological Foundations and Legal Implications of Corporate Cohesion, 

LAW & CONTEMP. PROBS., Summer 1985, at 83, 84–85 (providing a 

psychological perspective on “independent directors’ assessment whether 

the corporation’s interest is served by a derivative suit against their ‘insider’ 

colleagues” and concluding that social-psychological mechanisms produce 

bias in directors’ decisions that protect colleagues on the board from legal 

sanctions). 
8 See e.g., Michael S. Weisbach, Outside Directors and CEO Turnover, 

20 J. Fin. Econ. 431, 458 (1987) (finding that CEO turnover as observed 

during 1974-1983 was more likely correlated with poor firm performance 

when the board is dominated by independent directors); Eliezer M. Fich & 

Anil Shivdasani, Are Busy Boards Effective Monitors?, 61 J. FIN. 689, 714 

(2006) (observing in a study of Forbes 500 firms during 1989-1995 high 

correlation between executive turnovers of poorly performing firms and the 

independence of directors). 
9 See Yaron Nili, The “New Insiders”: Rethinking Independent Director 

Tenure, 68 HASTINGS L. J. 97, 113 & n., 132 & tbl.3 (2016) (finding that 

average director tenure has increased). 



  

1152 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 

executive officers.10 With insufficient turnover in the 

membership of the board of directors arises a host of concerns, 

not the least of which is undue obeisance to the status quo.11 

This can manifest itself by the board, and hence company 

policies and practices, becoming increasingly insular and thus 

removed from the interests of the firm’s shareholders as well 

as the markets the firm seeks to serve. 

We are taking advantage of this Symposium’s mission to 

think broadly in casting a future role for securities 

regulation.12 To this charge, we set forth a vision for 

addressing boardroom insularity by trying to incorporate a 

feature from a less complicated setting in which the smaller 

and privately held firm can advance by resorting to the model 

of the local public or town square. Historically, “[t]he town 

square was an integral city function for centuries throughout 

the world. It was the central hub of activity, a place for 

gathering to celebrate, receive information, conduct business, 

and to simply sit.”13 There, citizens of the same community 

could gather with business owners and share views likely 

derived from commonly observed and experienced 

developments.14 The Greeks are widely recognized as the first 

society to fully embrace the value of civic engagement through 

the public square.15 The Greek Agora in fifth century A.D. was 

constructed specifically for this purpose, serving as the nerve 

 

10 Id. at 124. 
11 Yaron Nili details a host of other concerns with longer director 

tenures, including affecting director independence, creating a “structural 

bias,” and leading to groupthink. Id. at 118–20. 

12 See Introduction, 2021 COLUM. BUS. L. REV. 472, 475 (2021) (“The 

Symposium intends to jumpstart scholarly efforts to develop guidance for 

courts, lawmakers, and market participants.”). 
13 Stephanie Rouse, A Return to the Town Square 1 (June 6, 2017) 

(unpublished manuscript), 

https://static1.squarespace.com/static/58b2397a2e69cf75a40cc057/t/5999e7

1b4c0dbfbeebed458a/1503258400531/A+Return+to+the+Town+Square+by

+Stephanie+Rouse.pdf [https://perma.cc/66UV-Z8NW]. 
14 Id. (“Before technology took off and created an environment that 

allowed for information at your fingertips, individuals gathered in town 

squares to share information, discuss politics and transact business.”). 
15 Id. at 3. 



  

No. 3:1147] CREATING A CORPORATE PUBLIC SQUARE 1153 

center of the city of Athens and hosted up to twenty thousand 

citizens to engage in civil discourse.16 Political theorist and 

philosopher Hanna Arendt wrote, “[T]o the Greek way of 

thinking, freedom was rooted in place, bound to one spot and 

limited in its dimensions, and the limits of freedom’s space 

were congruent with the walls of the city, of the polis or, more 

precisely, the agora contained within it.”17 

Expanding on the Agora, European squares were designed 

physically as well as philosophically to sit at the heart of the 

city, functioning as important local and regional economic 

hubs for trade, civil engagement, and entertainment.18 The 

multi-functional square “was a uniquely European invention, 

intimately connected to the development of democratic and 

representational self-government.”19 The early American 

tradition of town squares is borrowed directly from the 

European one.20 In this country, these early squares were 

simply informal gathering places located in the middle of the 

town, allowing civic engagement to take place out in the open 

where all could participate.21 

This quaint, perhaps romantic, image hardly characterizes 

the setting of today’s public companies. In a multinational, 

high-tech, COVID-fearing world, it is no longer possible to 

make a trip to the local pub to gauge your fellow investors’ 

feelings. Nonetheless, we invoke the analogy to the public 

square, as we believe the existence of such a forum would 

redound to the benefit of investors, officers, and boards of 

directors as a fount of current and useful information about 

their investors and stakeholders’ concerns. 

In this Article, we rethink the shareholder proposal rule, 

Rule 14a-8 of the Exchange Act of 1934 (the “Rule” or “Rule 

14a-8”).22 In doing so, we explore whether it can provide a 

 

16 Id. 
17 HANNAH ARENDT, THE PROMISE OF POLITICS 170 (Jerome Kohn ed., 

2005). 

18 Rouse, supra note 13, at 3. 
19 Id. 
20 Id. at 4. 
21 Id. 
22 Shareholder Proposals, 17 C.F.R. § 240.14a-8 (2021). 



  

1154 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 

ready-made corporate public square for all companies; that is, 

rather than view Rule 14a-8 as purely enabling shareholders 

to sample the beliefs of fellow shareholders, we perceive a 

broader social value. We cast Rule 14a-8 as a mechanism for 

assisting corporate directors generally, meaning not just those 

on the board of the corporation that is the target of a proposal, 

but directors at all corporations, in gathering valuable 

information to help them better perform their duties. For 

example, the Rule can enable all directors to inform 

themselves about issues that require them to balance the 

effect of their actions on their firm’s stock price and on other 

interests of their company.23 

In making these claims, we fully accept the functional view 

that Rule 14a-8 addresses itself to shareholders facing high 

barriers to their efforts to communicate with directors and 

among themselves by providing them with an inexpensive 

vehicle for making their views known.24 In essence, the 

functional view of the Rule is that it facilitates both 

shareholder communication and engagement by solving the 

collective action problem facing small investors, which in turn 

enables the board to take the temperature of a representative 

body of the firm’s shareholders on a wide range of issues. We 

support this view but we believe it is equally important to 

understand that the message derived from proposals, and the 

votes they garner, is also heard by managers of companies 

that were not directly targeted by the proposal. Indeed, the 

record reflects that these “shareholder votes can lead to 

important corporate governance changes,”25 and thus 

supports the view that corporate boards pay attention to 

 

23 One of the important functions of shareholder voting is “when there 

is an issue that requires a balancing between the share price and other 

legitimate interests of the company.” Randall S. Thomas & Paul H. 

Edelman, The Theory and Practice of Corporate Voting at U.S. Public 

Companies, in RESEARCH HANDBOOK ON SHAREHOLDER POWER 459, 468 

(Jennifer G. Hill & Randall S. Thomas eds., 2015). 
24 See, e.g., Donald E. Schwartz & Elliott J. Weiss, An Assessment of 

the SEC Shareholder Proposal Rule, 65 GEO. L. J. 635, 639 (1977). 
25 Edelman et al., supra note 5, at 1369 (citation omitted). 



  

No. 3:1147] CREATING A CORPORATE PUBLIC SQUARE 1155 

them.26 As such, directors who ignore issues and voting 

outcomes at other firms are ignoring valuable information. 

We further accept the view that other stakeholders can use 

Rule 14a-8 to communicate their interests to corporate boards, 

if they are willing to purchase a certain amount of stock in the 

corporation and phrase their proposals appropriately.27 With 

the surging interest among investors and managers 

concerning ESG, and especially matters bearing on 

sustainability, there has been a distinct tilt toward believing 

that boards in addressing sustainability explicitly need to 

take into account stakeholder interests in their decision-

making.28 

A further benefit of construing Rule 14a-8 to facilitate a 

public square is the weakening of the social and psychological 

forces that can insulate management and the board from 

alternative perspectives regarding the objectives of the firm 

and how they can be achieved. Boards live a cloistered life and 

their insularity sometimes is enhanced by practices of 
 

26 We do not limit ourselves to precatory votes because some 14a-8 

votes may require a bylaw to be adopted. See, e.g., Matthew F. Sullivan, 

Shareholder Bylaw Proposals, Delaware Certification, and the SEC 

After CA, Inc. v. AFSCME Employees Pension Plan, 87 U. DET. MERCY L. 

REV. 193, 195–201 (2010). 

27 Labor unions have been especially aggressive in using the rule in 

this fashion. See John G. Matsusaka et. al., Opportunistic Proposals by 

Union Shareholders, 32 REV. FIN. STUDS. 3215, 3219–3220 (2019). While 

companies sometimes object to these investors’ dual interests, arguing that 

these proposals should be stricken on various grounds, frequently they 

concede the point and allow a shareholder vote on the proposal. 
28 Indeed, the public square vision complements the view that 

corporations are besieged by not just their owners but a wide range of 

stakeholders to address interests beyond maximizing the value of the firm. 

See Barzuza, Curtis & Webber, supra note 1. One prominent movement in 

this direction revolves around the so-called New Paradigm. For further 

discussion of this stakeholder-oriented vision of corporate governance, see 

MARTIN LIPTON ET AL., WACHTELL, LIPTON, ROSEN & KATZ & INT’L BUS. 

COUNCIL, WORLD ECON. F., THE NEW PARADIGM: A ROADMAP FOR AN IMPLICIT 

CORPORATE GOVERNANCE PARTNERSHIP BETWEEN CORPORATIONS AND 

INVESTORS TO ACHIEVE SUSTAINABLE LONG-TERM INVESTMENT AND GROWTH 

5 (2016), 

https://www.wlrk.com/webdocs/wlrknew/AttorneyPubs/WLRK.25960.16.pd

f [https://perma.cc/2ZHJ-GXM6]. 



  

1156 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 

corporate management.29 Through years of service, directors 

naturally identify with the firm’s successes and the operating 

practices that produce the successes enjoyed. They risk being 

stewards of the status quo and not monitors of the 

stewardship of the officers. Thus, as their length of service 

increases, a director risks failing to broaden their perspective 

to reflect the constellation of views held by the shareholders. 

A public square in which shareholders could voice their views 

could therefore help directors preserve and even gain a far 

richer and aligned perspective. 

Given these important purposes, how can the 

shareholders’ beliefs best be communicated in a coordinated 

way? In theory and practice, institutional investors’ holdings 

are sufficiently large to economically support minimal 

interaction with portfolio companies.30 Nevertheless, as 

Professors Gilson and Gordon note, most of these investors are 

“rationally reticent” to initiate in a public fashion a campaign 

to persuade management and other holders to pursue a course 

of action.31 This in part is a consequence of inherent conflicts 

faced by many institutions, such as the fact their business 

models may be jeopardized by overt criticism of a portfolio 

company’s management that may also be a prospective client 

for its services.32 Moreover, the dramatic shift to indexed 

investing is built on a model of low administrative costs, which 

does not enable resources to be directed toward raising issues 

for management.33 Thus, among the largest group of 

 

29 See Sarah C. Haan, Shareholder Proposal Settlements and the 

Private Ordering of Public Elections, 126 YALE L. J. 262, 276 (2016) (“[F]rom 

the earliest stages of the process, corporate management oversees the 

submission process [for shareholder proposals], identifying excludable 

proposals and communicating with shareholders.”). 
30 Jeffrey N. Gordon, Institutions as Relational Investors: A New Look 

at Cumulative Voting, 94 COLUM. L. REV. 124, 130 (1994). 
31 Ronald J. Gilson & Jeffrey N. Gordon, The Agency Costs of Agency 

Capitalism: Activist Investors and the Revaluation of Governance Rights, 

113 COLUM. L. REV. 863, 867 (2013). 
32 Edelman et al., supra note 5 at 1402–03. 
33 Lucian A. Bebchuk & Scott Hirst, Index Funds and the Future of 

Corporate Governance: Theory, Evidence, and Policy, 119 COLUM. L. REV. 

2020, 2050–55 (2019). 



  

No. 3:1147] CREATING A CORPORATE PUBLIC SQUARE 1157 

investors, financial institutions, few have or can be expected 

to initiate communications to boards of their portfolio 

companies. Yet, they can and do make themselves heard by 

voting in favor of initiatives they believe are in the best 

interests of their beneficial owners and by withholding votes 

for directors as a means to communicate their unhappiness.34 

There is growing trend of index funds supporting 

shareholder proposals and otherwise signaling disapproval of 

board actions.35 Moreover, there is reason to believe this trend 

will become even more observable as index funds compete for 

 

34 See Gilson & Gordon, supra note 31, at 887 (“[W]hile mutual funds 

are not proactive, they are not passive . . . They very frequently oppose 

management on core corporate governance issues. . . . when the issue is 

presented to them.”); see also Brooke Fox, “Against” Votes by Institutional 

Investors Spike, AGENDA: A FIN. TIMES SERV., 

https://www.astfinancial.com/media/374142/against-votes-by-institutional-

investors-spike.pdf [https://perma.cc/RU24-DGPK] (“As Agenda has 

reported, Vanguard Group, BlackRock Inc, State Street Global Advisors and 

Fidelity all announced new initiatives that suggested they would impose a 

higher level of scrutiny on directors of companies in their portfolios to elicit 

changes that were in the best interests of their shareholders. As it turns 

out, they’re being true to their word.”). 
35 See e.g., Dawn Lim & Justin Baer, BlackRock, Other Investors Target 

Climate Issues, Covid-19 Response and Board Seats in Shareholder Votes, 

WALL ST. J. (Aug. 12, 2021, 7:00 AM), 

https://www.wsj.com/articles/blackrock-other-investors-wield-growing-

board-shareholder-vote-clout-11628766001 (on file with the Columbia 

Business Law Review) (noting fund giant Blackrock, Inc. in the year ending 

June 30, 2021, withheld support for ten percent of all director nominees and 

backed sixty-four percent of the year’s environmental shareholder 

proposals.); Marc Treviño, June M. Hu & Joshua L. Levin, 2021 Proxy 

Season Review: Shareholder Proposals on Environmental Matters, HARV. L. 

SCH. F. CORP. GOVERNANCE (Aug. 11, 2021), 

https://corpgov.law.harvard.edu/2021/08/11/2021-proxy-season-review-

shareholder-proposals-on-environmental-matters/ [https://perma.cc/W5PN-

5SXU] (noting that Institutional Shareholder Services (ISS) supported 

sixty-four percent of environmental proposals in the year ending June 

2021). One regularly watched metric is the number of companies whose 

board nominees received eighty percent or more of the votes cast. Lim & 

Baer, supra. In the year ending June 30, 2021, six percent of company-

supported board candidates among companies in the Russell 3000 firms 

failed to garner at least eighty percent of shareholder support, the largest 

percentage in since 2017. Id. 



  

1158 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 

the wealth of millennials, an investor group widely seen as 

deeply valuing ESG, and as fund managers, especially those 

following a passive strategy, continue to promote their funds 

aggressively by trumpeting their voting commitments to 

ESG.36 As such, these funds will be expected to be consumers 

of the information embedded in well-crafted ESG proposals. 

Hence, the temperature being taken is not just that of the 

proponent but a broad group of the company’s stockholders 

that likely is reflective of societal beliefs. However, given the 

relatively few formal communication channels for 

stakeholders to pass their unvarnished views directly to 

corporate boards, Rule 14a-8 can be a vehicle to distribute 

their views more directly to boards that are committed to 

stakeholder primacy.37 To the extent that the legislative 

history of the Rule is unclear about supporting our view, we 

argue that it should be expanded by Congress to remove such 

doubts. 

There is another advantage afforded to institutional 

investors by Rule 14a-8 proposals. As experience shows, even 

though many institutional investors are rationally reticent to 

initiate proposals, they do vote and in doing so support 

proposals they believe are well crafted.38 Additionally, many 

institutions regularly meet with some or even many of their 

portfolio companies.39 Missing from these one-off 

engagements, however, is both the chance to discern the views 

of other financial institutions and the opportunity to present 

a cohesive voice across a group of investors behind a 

recommended course of action set forth in a proposal. 

Moreover, these one-off discussions and their results are not 

 

36 Michal Barzuza, Quinn Curtis & David H. Webber, Shareholder 

Value(s): Index Fund ESG Activism and the New Millennial Corporate 

Governance, 93 S. CAL. L. REV. 1243, 1303–1305 (2020). 
37 See Thomas & Edelman, supra note 23, at 468. (arguing that a 

shareholder vote provides a measure of shareholders’ intensity of 

preferences and aggregates the preferences of the shareholders as well as 

conveying that information to the board, which puts the board “in a better 

position to balance the interests of the various stakeholders of the firm.”). 
38 See Gilson & Gordon, supra note 31, at 867, 887–88. 
39 Id. 



  

No. 3:1147] CREATING A CORPORATE PUBLIC SQUARE 1159 

nearly as transparent as the results of votes on shareholder 

proposals. That is, voting on proposals through the Rule 14a-

8 mechanism not only informs financial institutions regarding 

the beliefs of other institutions, but it does so with the result 

that their collective sentiment is aggregated in the vote tally, 

thereby adding force to the view of the individual institutional 

investor.40 And, equally significant, is that Rule 14a-8 enables 

overt coordination among institutions. Securities and 

Exchange Commission (SEC) rules allow, in connection with 

proxy solicitations, soft coordination among institutions by 

permitting them to not just announce how they will vote but 

also to encourage other institutions to similarly act.41 Outside 

the proxy voting environment, such active coordination poses 

regulatory concerns among large investors who may fear their 

actions may unintentionally cross the line into requiring 

compliance with the securities laws’ early notice provisions or 

even trigger an aggressive poison pill provision.42 Hence, 

shareholder proposals enable coordination among institutions 

and the shareholder proposal itself is the focus for such 

coordination. 

We share Professor Jonathan Macey’s insightful 

explanation of the cause for rising interest in ESG 

considerations among investors as a growing belief that 

government cannot address contemporary social problems so 

 

40 See Robert B. Thompson & Paul H. Edelman, Corporate Voting, 62 

VAND. L. REV. 127, 144 (2009); Thomas & Edelman, supra note 23, at 468. 
41 See 17 C.F.R. § 240.14a-l-2(iv) (2021) (exempting communications in 

a regular basis that state how shareholder will vote, and reasons for so 

voting, from proxy regulation); id. § 240.14a-2(b)(1) (exempting 

communication from most proxy rules a communication by one who does not 

solicit proxies and is not have certain self-interested relationships with the 

registrant); id. § 240.14a-2(b)(2) (creating broad exemption for soliciting 

where no more than ten persons are approached). 
42 See Jeffrey N. Gordon, Corporate Vote Suppression: The Anti-Activist 

Pill in Williams Companies Stockholder Litigation, CLS BLUE SKY BLOG 

(Aug. 19, 2021), https://clsbluesky.law.columbia.edu/2021/08/19/corporate-

vote-suppression-the-anti-activist-pill-in-the-williams-companies-

stockholder-litigation/ [https://perma.cc/99EX-FM8S] (closely examining 

legal perils of institutions following parallel course in the context of broadly 

worded poison pills with low ownership threshold). 



  

1160 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 

that reliance on the private sector, most significantly 

businesses, is necessary for solutions to social problems.43 At 

the same time, we part company with him in our hopefulness 

that incorporating the private sector will be successful. Macey 

wisely raises concerns that shareholders’ focus on ESG faces 

formidable practical obstacles, such as firm managers being 

largely compensated by bonuses linked to the bottom line, 

being elected by owners, not other constituencies, and being 

subject to pressures from activist investors focused on 

financial performance.44 We do not disagree with these 

concerns, but we believe Rule 14a-8 can nurture the public 

square so that the rising interest in ESG can more fully be 

gauged by the public company boards as they navigate among 

these dueling forces. 

With this plethora of valuable purposes to serve, we find it 

surprising that the SEC, at the behest of corporate 

management, has recently sharply raised the requirements 

shareholders must meet to use the Rule.45 Upon proposing the 

cuts (“Proposing Release”), the SEC observed that a handful 

of individual investors account for a sizable proportion of all 

proposals.46 In adopting the final rules, it also raised concerns 

regarding the costs proponents with small stakes impose on 

companies and their shareholders through their proposals.47 

 

43 Jonathan R. Macey, ESG Investing: Why Here? Why Now? 2 (George 

Mason Law & Econ. Rsch., Working Paper No., 21-22, 2021) 

http://ssrn.com/absteact=3942903 (on file with the Columbia Business Law 

Review). 
44 Id. at 25-29. 

45 See infra Section III.A for discussion of these cutbacks. 
46 See Procedural Requirements and Resubmission Thresholds Under 

Exchange Act Rule 14a-8, Exchange Act Release No. 87,458, 84 Fed. Reg. 

66,458, 66,483 (proposed Dec. 4, 2019) (to be codified at 17 C.F.R. pt. 240) 

[hereinafter Proposing Release] (relying on evidence that five individuals 

accounted for twenty-seven percent of all proposals to S&P 1500 firms 

during 2003-2014.). 

47 Procedural Requirements and Resubmission Thresholds Under 

Exchange Act Rule 14a-8, Exchange Act Release No. 89, 964, 84 Fed. Reg. 

70,240, 70,245 (Nov. 4, 2020) (to be codified at 17 C.F.R. pt. 240) (estimating 

the cost to the company in addressing proposals to be between $50,000 and 

$150,000 per proposal). The SEC also recounted its repeated observations 



  

No. 3:1147] CREATING A CORPORATE PUBLIC SQUARE 1161 

In addition, critics have argued that environmental and social 

proposals have not increased firm value.48 

We believe all boards should wish to learn about their 

investors’ views concerning corporate governance issues, and 

boards, whether stakeholder-oriented or not, should believe it 

is in their interest to learn whether there are broadly held 

views regarding environmental and social issues impacted by 

the firm. While some conditions should be imposed on 

proponents to guard against abusive proposals, the data 

reviewed below shows that the former rule did a reasonable 

job of filtering out those proposals from meritorious ones.49 

Moreover, to the extent that a small group of investors, so-

called “gadflies,” produce a disproportionate number of the 

poorly tailored proposals and hence are a distraction, we 

believe that the SEC should study whether their proposals are 

associated with negative returns—as one of the studies 

reviewed below finds50—and, if so, consider why this might be 

the case. After such study, the SEC can craft an appropriate 

regulatory response. We envision the SEC carefully studying 

the question of how gadfly proposals may differ from proposals 

submitted by other less active individual investors. Just why 

is it likely that this group’s proposals differ in impact from 

those of the average proponent? This inquiry could provide the 

basis for a searching cost-benefit analysis that could even lead 

to setting a limit on the total number of shareholder proposals 

that any individual can present annually at all public 

 

that Rule 14a-8 can be subject to misuse and even harassment. Id. at 70,241 

n.2. 

48 The empirical evidence on the financial effects of environmental and 

social shareholder proposals is mixed. Yazhou He, Bige Kahraman & 

Michelle Lowry, ES Risks and Shareholder Voice 1 n.1 (ECGI, Working 

Paper No. 786/2021, 2021) (collecting studies finding financial benefits as 

well as those not finding benefits). 
49 See e.g., John G. Matsusaka, Oguzhan Ozbas & Irene Yi, Can 

Shareholder Proposals Hurt Shareholders? Evidence from Securities and 

Exchange Commission No-Action Letter Decisions, 64 J. LAW & ECON 107, 

125–26 (2021) (finding statistically significant positive returns associated 

with SEC’s decision to omit shareholder proposal thus supporting the view 

that this mechanism discriminates against negative value proposals). 
50 See supra note 197 and accompanying text. 



  

1162 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 

companies. We review data below that suggests this course of 

action. 

This Article proceeds as follows. In Part II, we provide an 

overview of Rule 14a-8 and its broad range of uses in the areas 

of corporate governance and social responsibility. Part III 

offers a wide-ranging inquiry into the mechanics, legislative 

history, academic commentary, and judicial evolution of Rule 

14a-8. We find that the Rule has implications that eclipse its 

role solely as a vehicle for shareholder voting on discrete 

issues. In Part IV, we next turn to the empirical evidence 

about Rule 14a-8: Its use by a broad variety of proponents, 

especially by corporate gadflies, targeting a wide range of 

topics and experiencing a diverse set of outcomes. In Part V, 

we turn to our policy recommendation that Rule 14a-8 should 

be viewed as a corporate public square, serving an important 

role informing boards of their investors and stakeholders’ 

viewpoints. In Part VI, we conclude. 

II. OVERVIEW OF RULE 14A-8 

Rule 14a-8 allows a shareholder, subject to certain 

limitations, to submit a proposal for inclusion in the corporate 

proxy material, which will later be voted on by fellow 

shareholders on the corporation’s proxy card.51 Shareholders 

did not start to take significant advantage of Rule 14a-8 until 

the 1960s and 1970s.52 Since that time, the rule has been often 

used in two different settings: initiating corporate governance 

changes and raising social responsibility issues.53 

 

51 17 C.F.R. § 240.14a-8 (2021). 
52 Kosmas Papadopoulos, The Long View: The Role of Shareholder 

Proposals in Shaping U.S. Corporate Governance (2000-2018), HARV. L. SCH. 

F. CORP. GOVERNANCE (Feb. 6 2019), 

https://corpgov.law.harvard.edu/2019/02/06/the-long-view-the-role-of-

shareholder-proposals-in-shaping-u-s-corporate-governance-2000-2018/ 

[https://perma.cc/RH32-CFD2]. 
53 Haan, supra note 29, at 272 (“The academic literature generally 

divides shareholder proposals into a corporate governance category and a 

social and environmental category.”) See generally Randall S. Thomas & 

James F. Cotter, Shareholder Proposals in the New Millennium: 



  

No. 3:1147] CREATING A CORPORATE PUBLIC SQUARE 1163 

Governance proposals first appeared during the 1960s and 

1970s, when certain individual investors initiated many 

shareholder proposals on issues such as the repeal of classified 

boards and the adoption of cumulative voting.54 In the late 

1980s, institutional investors began submitting more 

shareholder proposals “in response to the widespread 

adoption of poison pills, payments of ‘greenmail,’ and other 

acts by boards to entrench themselves in the wake of a wave 

of ‘hostile’ takeovers.”55 Later, in the 1990s, shareholders 

made a substantial number of proposals seeking governance 

changes, including proposals to declassify boards, remove 

poison pills, and curb executive pay.56 In the new millennium, 

some highly-successfully shareholder proposal campaigns 

influenced the broad adoption of various corporate governance 

practices, such as requiring majority vote standards for 

uncontested director elections and criticizing companies’ “say 

on pay” policies.57 Rule 14a–8 also has been used to shine a 

light on a broad range of social and environmental issues. 

Most notable of these were anti-apartheid proposals seeking 

to terminate a corporation’s business activities in South 

Africa;58 proposals seeking to prohibit a corporation from 

participating in the Arab boycott of Israel;59 proposals seeking 

corporations to agree to comply with codes of environmental 

 

Shareholder Support, Board Response, and Market Reaction, 13 J. CORP. 

FIN. 368 (2007) (discussing developments in shareholder proposals). 
54 Papadopoulos, supra note 52. 
55 Id. 

56 Id. Labor unions were very active on corporate governance issues. 

See Stewart J. Schwab & Randall S. Thomas, Realigning Corporate 

Governance: Shareholder Activism by Labor Unions, 96 Mich. L. Rev. 1018, 

1019–20 (1998). 
57 Papadopoulos, supra note 52. 
58 See Philip A. Broyles, The Impact of Shareholder Activism on 

Corporate Involvement in South Africa During the Reagan Era, INT’L REV. 

MOD. SOCIOLOGY, Spring 1998, at 1, 6–7 (examining effects of shareholder 

activism the Rule 14a-8 proposals and other methods of engagement). 
59 See, e.g., Maya Mueller, The Shareholder Proposal Rule: Cracker 

Barrel, Institutional Investors, and the 1998 Amendments, 28 STETSON L. 

REV. 453, 509 n. 422 (1998). 



  

1164 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 

standards;60 and proposals seeking to terminate a 

corporation’s manufacture or sale of armaments.61 While 

there is a broad range of proposals, they regularly are seen as 

falling into two distinct groups—governance and 

environmental/social—with the distinctions being of scope as 

well as of substance.62 What the SEC’s data reflects is that, 

initially, governance proposals on average garner a much 

greater percentage of support from shareholders than do 

social or environmental proposals.63 However, there are more 

substantial increases in shareholder support on second and 

third votes on social and environmental proposals, leading to 

a similar rate of proposals that receive at least twenty-five 

percent of shareholder support for governance, social, and 

environmental proposals after resubmissions.64 In fact, social 

and environmental proposals that initially fail to receive 

majority support are more likely to be re-submitted than 

governance proposals of the same category.65 Thus, the 

steady, persistent efforts of their proponents shined a bright 

light on a particular problem that needed fixing. Ultimately, 

the repeated efforts garnered more votes, and in all cases the 

 

60 Proposing Release, supra note 46, at 66,479, 66,480 fig.4, 66,484 

fig.7B (capturing annual number of ESG proposals each year from 2004 

through 2018). 
61 See, e.g., Medical Comm. for Human Rights v. SEC, 432 F.2d 659 

(D.C. Cir.1970) (leading decision on scope of Rule 14a-8 upholding proposal 

in response to public company’s ongoing production of napalm for use in 

Vietnam War). 
62 See Elad L. Roisman, Comm’r, Sec. & Exch. Comm’n, Keynote 

Speech at the Society for Corporate Governance National Conference (July 

7, 2020), https://www.sec.gov/news/speech/roisman-keynote-society-

corporate-governance-national-conference-2020 [https://perma.cc/38UX-

QQGA] (“[C]orporate governance stands by itself and rarely has a direct 

relationship to environmental or social issues. Best practices in corporate 

governance are usually the result of many years of private ordering 

experimentation and experience. Also, governance reform focuses on the 

company itself and what is best for its optimal operation as well as its 

shareholders. The same is not necessarily true of ‘E’ or ‘S.’ Those matters 

tend to be more society, or stakeholder, focused.”). 
63 Proposing Release, supra note 46, at 65,501 fig.10. 
64 Id. 
65 Id. at 66,500. 



  

No. 3:1147] CREATING A CORPORATE PUBLIC SQUARE 1165 

proposal process shined a light on investor concerns.66 Like so 

many worthwhile ideas, reflection over time, not instant 

acceptance, leads to enduring change. We can appreciate that 

Rule 14a-8 has been a means for introducing change that 

aligns governance practices not just with owner preferences, 

but also with social norms. 

More important for the purposes of this Article is the role 

Rule 14a-8 plays in raising and broadening the consciousness 

of the company’s board and executives. Boards and executive 

ranks are necessarily small relative to the body of 

stockholders. Moreover, the perspective of board members, 

though elected by the shareholders, is not a microcosm of the 

shareholders and even less likely to be a microcosm of society 

as a whole. We believe that well-crafted shareholder proposals 

that seek reports, procedures, or other actions on a matter 

already determined to be a proper subject of shareholder 

action under applicable state law invite, and likely cause, the 

directors and executives to reflect on an issue that may not 

otherwise have been considered. Thus, we see that Rule 14a-

8 is a means by which concerned shareholders can gain some 

attention within the boardroom and executive suite on a 

matter and even introduce a fresh perspective for 

consideration. The fruits of this perspective cannot be fully 

measured ex ante; history now reflects that important 

changes have been brought about in significant measure by 

shareholder proposals, such as occurred with proposals 

focused on majority vote resolutions, South Africa, and now 

climate change.67 

Despite these virtues, proposals are often viewed 

negatively by corporate management.68 Evidence of this 

 

66 Id. at 66,501 fig.10. 
67 See supra notes 58–61. 
68 See John G. Matsusak, Why Do Managers Fight Shareholder 

Proposals? Evidence from No-Action Letter Decisions, HARV. L. SCH. F. CORP. 

GOVERNANCE (Jan 20, 2017), 

https://corpgov.law.harvard.edu/2017/01/20/why-do-managers-fight-

shareholder-proposals-evidence-from-no-action-letter-decisions/ 

[https://perma.cc/J5EL-7W2N] (“Corporate managers, by and large, are 

skeptical of shareholder proposals.”). Even some defense side law firms urge 



  

1166 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 

hostility is variously manifested. One direct reaction are 

frequent refusals by a company to include proposals on their 

ballot. Their refusal triggers the SEC no-action letter process, 

whereby the SEC, after receiving materials from the company 

and the proponent, determines whether to issue a no-action 

letter.69 In most cases, if the SEC issues a no-action letter, 

then the proposal is not included in the proxy statement.70 

Another reaction by companies is to include the proposal in 

management’s proxy solicitation alongside a detailed and long 

explanation of why shareholders should reject the proposal. 

Often accompanying management’s rejection 

recommendation is an attack on the proponent for being a 

gadfly, a member of a small number of shareholders who 

yearly account for a high percentage of shareholder proposals. 

The charge that gadflies are not genuinely interested in the 

company’s affairs is also a justification for the board’s refusal 

to permit shareholders’ access to the company’s proxy 

statement.71 We examine gadflies below. 

III. THE MECHANICS, LEGISLATIVE-
REGULATORY HISTORY, AND COMMENTARY OF 

RULE 14A-8 

In this Part, we provide an overview of the legislative 

history, regulatory and judicial developments, and the 

academic commentary for Rule 14a-8; in doing so, we find 

support for our vision of the Rule as a mechanism for creating 

a corporate public square. We note at the outset that our focus 

is on proposals that are not otherwise excludable by Rule 14a-

 

board action on shareholder proposals that receive majority support by the 

company’s shareholders. See Andrew R. Brownstein and Igor Kirman, Can 

A Board Say No When Shareholders Say Yes? Responding to Majority Vote 

Resolutions, BUS. LAWYER, Nov. 2004, at 23, 75 (lawyers from Wachtell, 

Lipton, Rosen & Katz arguing that “[f]ollowing a majority vote in favor of a 

shareholder proposal, companies should include consideration of the matter 

at an upcoming board meeting.”). 
69 See Matsusaka et al., supra note 49, at 112–14. 
70 Id. at 113. 
71 Matsusaka et al., supra note 49, at 113 (listing statutory bases for 

excluding shareholder proposals). 



  

No. 3:1147] CREATING A CORPORATE PUBLIC SQUARE 1167 

8. The rule contains a variety of exclusions under which a 

company can exclude a proposal from its proxy materials.72 

Among the many exclusions are that a proposal is not a proper 

subject of shareholder action under state law,73 a violation of 

law,74 false or misleading statement,75seeks to redress of a 

personal claim or grievance76 or relates to operations 

accounting for less than five percent of a company’s assets or 

business.77 Rule 14a-8(j) sets forth the steps management 

 

72 17 C.F.R. § 240.14a-8 (2021). 
73 If, under the laws of the state in which the corporation is 

incorporated, the proposal is not a proper subject for action by shareholders, 

the corporation is not required to include the shareholder proposal. Whether 

a proposal is a proper subject for action by shareholders will depend on the 

applicable state law. A proposal that mandates certain action by the board 

of directors may not be a proper subject matter for shareholder action, while 

a proposal recommending or requesting such action may be a proper subject. 

17 C.F.R. § 240.14a-8(i)(1). 

74 If the shareholder proposal would require the corporation to violate 

state or federal law or the law of a foreign jurisdiction to which the 

corporation is subject, the corporation need not include it. Id. § 240.14a-

8(i)(2). 
75 If the shareholder proposal or supporting statement is false or 

misleading, the corporation does not have to include it. Id. § 240.14a-8(i)(3). 
76 If the shareholder proposal concerns the redress of a personal claim 

or grievance against the corporation or any other person, or is designed to 

result in a benefit to the shareholder or to further a personal interest that 

is not shared with the other shareholders at large, the corporation need not 

include it. Id. § 240.14a-8(i) (4). 
77 If the shareholder proposal relates to operations that account for less 

than five percent of the corporation’s total assets and less than five percent 

of its net earnings and gross sales, and is not otherwise significantly related 

to the registrant’s business, the corporation does not have to include it. Id. 

§ 240.14a-8(i)(1). In adopting the five percent standard, the SEC stated that 

shareholder proposals must be included in the proxy statement, 

notwithstanding their failure to reach the five percent threshold, “if a 

significant relationship to the issuer’s business is demonstrated on the face 

of the resolution or supporting statement.” Proposed Amendments to Rule 

14a-8 Under the Security Exchange Act of 1934 Relating to Proposals by 

Security Holders, Exchange Act Release No. 19,135, Investment Company 

Act Release No. 12,734, 47 Fed Reg. 47.420, 47,428 (proposed Oct. 14, 1982) 

(to be codified at 17 C.F.R. pt. 240). The meaning of “significantly related” 

is not limited to economic significance. 17 C.F.R. § 240.14a-8(i)(5)–(13) 

contain a number of other restrictions; The corporation need not include a 



  

1168 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 

must follow to exclude a proposal from its proxy materials.78 

Duly qualified proposals thereafter appear in the company’s 

proxy materials and, unless they are withdrawn, stockholders 

vote upon them.79 As we find in Part V, proposals opposed by 

management face a most uncertain fate; but of interest is that 

even those that fail to garner majority approval thereafter do 

lead to firms modifying their policies or practices in the wake 

of such voting.80 However, the company sometimes ignores 

proposals that garner majority approval.81 Of significance is 

that the existence of a proposal often is the basis for 

negotiations whereby firm policies or practices are changed to 

obtain the withdrawal of a shareholder proposal.82 Proposals 

thus can lead to very different results regardless of the vote 

by the shareholders. 

 

shareholder proposal in its proxy statement if: (i) the proposal deals with a 

matter beyond the registrant’s power to effectuate; (ii) the proposal deals 

with a matter relating to the conduct of ordinary business operations; (iii) 

the proposal relates to director election by seeking to include a person for 

election on management’s proxy materials, seeking to remove a director 

from office, disqualify a present nominee or question the competence or 

qualities of a nominee or director; (iv) the proposal conflicts with a proposal 

to be submitted by the corporation at the same meeting; (v) the corporation 

has already substantially implemented the proposal; and (vi) the proposal 

is substantially duplicative of a proposal submitted to the corporation by 

another shareholder that will be included in the corporation’s proxy 

material for the meeting. 
78 17 C.F.R. § 240.14a-8(j); see Matsusaka et al., supra note 49, at 112–

14. 
79 See Matsusaka et al., supra note 49, at 112–14. 

80 See infra note 203 and accompanying text. 
81 See infra note 150. 
82 See Willard T. Carleton, James M. Nelson & Michael S. Weisbach, 

The Influence of Institutions on Corporate Governance through Private 

Negotiations: Evidence from TIAA-CREF, 53 J. FIN. 1335, 1335–37 (1998). 



  

No. 3:1147] CREATING A CORPORATE PUBLIC SQUARE 1169 

A. Qualifying the Proposal 

A proponent’s eligibility to use Rule 14a-8 is the doorway 

to the virtual public square.83 Prior to January 4, 2021,84 to 

be eligible to submit a proposal, a shareholder was required to 

own at least $2,000 in market value, or 1%, of the company’s 

securities entitled to vote on the proposal for at least one year 

prior to the date on which the proposal is submitted.85 For 

resubmitted proposals, prior to January 4, 2021, the 

restrictions provided that the proposal can be excluded if the 

proposal: (1) deals with substantially the same subject matter 

as a prior proposal that was submitted within the previous 

five years; (2) is submitted for a meeting to be held within 

three years of its last submission; (3) and either (i) the 

proposal was submitted at only one meeting during the 

previous five years and received less than three percent of the 

votes, (ii) the proposal was submitted at two meetings during 

the previous five years and received less than six percent of 

votes at the time of its second submission, or (iii) the proposal 

was submitted at three or more meetings during the previous 

five years and received less than ten percent of votes at the 

time of its last submission.86 

Of particular importance for this Article, in 2020, the SEC 

voted to raise significantly the standards for proponent 

 

83 To be clear, we do support well-calibrated ownership criteria to be 

eligible to use Rule 14a-8; as we develop, the rule springs from a provision 

of the Securities Exchange Act focused on the shareholder franchise so that 

it would be inappropriate to extend the right to non-shareholders. We do 

believe there should be an amount of ownership requirement, with that 

amount set with an eye toward not foreclosing proposals from a large sector 

of retail investors so that some insight from the mode of retail holdings in a 

large cohort of public firms would be useful in developing a minimum 

holding amount. 
84 Procedural Requirements and Resubmission Thresholds Under 

Exchange Act Rule 14a-8, Exchange Act Release No. 89,964, 84 Fed Reg. 

70,240 (Nov. 4, 2020) (to be codified at 17 C.F.R. pt. 240) (amending Rule 

14a-8(b), effective January 4, 2021). 
85 17 C.F.R. § 240.14a-8(b)(1) (2021) (amended by Procedural 

Requirements and Resubmission Thresholds Under Exchange Act Rule 14a-

8, 84 Fed Reg. at 70,240. 
86 Id, § 240.14a-8(i)(12). 



  

1170 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 

stockownership and the criteria to be met to resubmit 

proposals.87 The new rules provide that to be eligible to make 

proposals under Rule 14a–8, submitting proposals must hold 

at least $2,000 of the company’s securities for at least 3 years, 

$15,000 of the company’s securities for at least 2 years, or 

$25,000 of the company’s securities for at least 1 year (“New 

Stockownership Restrictions”).88 Also, under the new rules, a 

company may exclude a proposal from its proxy materials for 

any meeting held within three years of the last time it was 

included if the proposal received less than 5% of the vote if 

proposed once within the preceding 5 years; less than 15% of 

the vote on its last submission to shareholders if proposed 

twice previously within the preceding 5 years; or less than 

25% of the vote on its last submission to shareholders if 

proposed 3 times or more previously within the preceding 5 

years (“New Resubmission Restrictions”).89 

In proposing these changes, the SEC staff considered the 

likely impact on the number of shareholder proposals.90 On 

one hand, the New Stockownership Rules not unexpectedly 

would have different effects depending on the length of the 

proponent’s ownership in the company—if all the proponents 

held their shares for at least three years, under the new rules 

no higher ownership is imposed so there would be no 

exclusionary impact.91 On the other hand, if the SEC assumed 

that all proponents acquired their shares one year before the 

meeting and held them through the meeting date, so that the 

$25,000 threshold would apply, the increased dollar threshold 

“would result in the exclusion of 51 percent of the proponents 

(and 56 percent of the proposals that were submitted) to be 

considered at the shareholder meeting held in 2018.”92 

 

87 Procedural Requirements and Resubmission Thresholds Under 

Exchange Act Rule 14a-8, 84 Fed Reg. at 70,240. 
88 17 C.F.R. § 240.14a-8(b) (2021). 
89 Id. § 240.14a-8(i)(12). 

90 Proposing Release, supra note 46. 
91 Id. at 66,497. 
92 Id. The SEC staff apparently attempted to submit an additional 

report on the impact of the distribution of stockownership on the effect of 

the New Stockownership Rules on the likely level of stockholder 



  

No. 3:1147] CREATING A CORPORATE PUBLIC SQUARE 1171 

Moreover, the SEC opined that the disproportionate impact of 

the New Stockownership Rules would fall on individual 

proponents and on the number of corporate governance 

proposals submitted.93 More generally, the SEC salved any 

unease arising from reducing the overall number of 

proponents and proposals by observing, “shareholders now 

have alternative ways, such as through social media, to 

communicate.”94 

 

submissions using data provided by Broadridge Financial Services Inc. 

However, this preliminary study appears to have been temporarily excluded 

from public release at the request of the SEC’s chief economist. See 

Memorandum from S.P. Kothari, Chief Economist, Sec. & Exch. Comm’n, to 

File S7-23-19, Procedural Requirements and Resubmission Thresholds 

under Exchange Act Rule 14a-8 (August 14, 2020), 

https://www.sec.gov/comments/s7-23-19/s72319-7645492-222330.pdf 

[https://perma.cc/B3GA-87MY] (“[I]t was my view that the preliminary draft 

analysis was not relevant to the economic question central to the proposal 

and that the data had limitations that reduced its potential value to 

analyzing the proposal.”). 
93 Proposing Release, supra note 46, at 66,499. The disproportionate 

impact on individuals would arise because “the average holdings of retail 

investors are typically lower than the average holdings of institutional 

investors.” Id. The larger effect on corporate governance proposals stems 

from the fact that “86 percent of the proposals submitted by individual 

investors are governance proposals, whereas 47 percent of the proposals 

submitted by institutional investors are governance proposals.” Id. (citation 

omitted). 
94 Id. at 66,462. There is a growing increase in engagement by financial 

institutions with the management of portfolio companies. See Jeffrey D. 

Karpf, Helena K. Grannis & Gaia Goffe, Shareholder Engagement Trends 

and Considerations, CLEARY, GOTTLIEB, STEEN & HAMILTON (Jan. 10, 2020), 

https://www.clearygottlieb.com/news-and-insights/publication-

listing/shareholder-engagement-trends-and-considerations 

[https://perma.cc/A83J-XVTJ]. But see Lisa M. Fairfax, Mandating Board-

Shareholder Engagement?, 2013 U. ILL. L. REV. 821, 842-43 (2013) 

(reasoning there is cause for skepticism of shareholder engagement not 

involving blockholders); Amy Borrus, Exec. Dir., Council of Institutional 

Invs. et al., Comment Letter on Proposed Rule: Procedural Requirements 

and Resubmission Thresholds under Exchange Act Rule 14a-8 (July 29, 

2020), https://www.sec.gov/comments/s7-23-19/s72319-7502063-221908.pdf 

[https://perma.cc/G7VE-VMU7] (observing engagement by some 

blockholders with portfolio companies is not as encompassing as occurs 

through an inclusive shareholder proposal rule). 



  

1172 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 

The Proposing Release also contains some estimates of the 

impact of the New Resubmission Rules were they in effect 

from 2011 to 2018: “[W]e estimate that the proposed 

amendments to the resubmission thresholds would result in 

an additional 212 resubmitted proposals being excludable (15 

percent of the total resubmitted proposals in this 

timeframe).”95 The SEC further observed that these cutbacks 

are likely to fall particularly heavily on proposals raising 

environmental and social issues.96 

In light of the SEC’s estimates of the large negative effects 

of the New Stockownership Rules and the New Resubmission 

Rules on the likely future use of the Rule, we believe it is 

important to ask if the new rules are justified as consistent 

with the important functions and goals served by the Rule. We 

turn next to a detailed exploration of those goals and policy 

objectives. 

B. Legislative History, Regulatory Evolution and 
Judicial Development of Rule 14a-8 

The SEC created Rule 14a-8 pursuant to its rule making 

authority set forth in section 14 of the Securities Exchange 

Act of 1934,97 making it important to begin by examining the 

purpose and history of that statute. The Exchange Act has two 

overarching purposes: protecting investors engaged in 

securities transactions and assuring public confidence in the 

integrity of the securities markets.98 Central to achieving 

these objectives, the Act created the SEC and, in section 14, 

 

95 Proposing Release, supra note 46, at 66,500. 
96 Id. at 66,500. One reason for this particularly adverse effect is that 

proposals on environmental and social issues tend to receive lower levels of 

voting support than do governance proposals. Id. A second reason is that 

these proposals tend to be resubmitted more often than governance 

proposals. Id. at 66,501. 
97 Securities Exchange Act of 1934 § 14, 15 U.S.C. § 78n (2018). 

98 S. REP. NO. 100-265, at 46 (1987) (“The core of this ‘truth in securities’ 

law is a requirement that investors receive full and fair disclosure relating 

to the securities they purchase.”); S. REP. NO. 73-47, at 1 (1933) (statement 

of Franklin D. Roosevelt) (“[O]ur broad purpose [is to] . . . protect[] investors 

and depositors.”). 



  

No. 3:1147] CREATING A CORPORATE PUBLIC SQUARE 1173 

authorized it, among other tasks, to prescribe rules and 

regulations with regard to proxy solicitation as it deems 

“necessary or appropriate in the public interest or for the 

protection of investors.”99 

The legislative history of section 14(a), however, is very 

limited, and what does exist emphasizes the importance 

Congress placed on assuring that stockholders of public 

companies were adequately informed when exercising their 

voting franchise through the execution of a proxy. For 

example, a report by the Senate Committee on Banking and 

Currency in June 1934 (the “1934 Senate Report”) observes 

that the objective of proxy regulation is to provide 

shareholders with greater information to assist them in the 

voting process—information about matters such as the 

financial condition of the company, the major questions of 

policy to be decided at shareholders’ meetings, and the 

matters for which voting authority is sought through the 

proxy.100 The report further states: 

In order that the stockholder may have adequate 

knowledge as to the manner in which his interests are 

being served, it is essential that he be enlightened not 

only as to the financial condition of the corporation, 

but also as to the major questions of policy, which are 

decided at stockholders’ meetings. Too often proxies 

are solicited without explanation to the stockholder of 

the real nature of the matter for which authority to 

cast his vote is sought.101 

The other key component of the Exchange Act’s legislative 

history is the report prepared by the Committee on Interstate 

and Foreign Commerce in August 1934 (the “1934 House 

Report”) that details many unfair practices in the proxy 

process.102 The report states, “Fair corporate suffrage is an 

important right that should attach to every equity security 

 

99 15 U.S.C. § 78n. 
100 S. REP. NO. 73-1455, at 74–77 (1934). 
101 Id. at 74. 
102 H.R. REP. NO. 73-1383, at 13 (1934). 



  

1174 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 

bought on a public exchange.”103 Then the report continues to 

describe the misuse of proxy rules by management: 

Managements of properties owned by the investing 

public should not be permitted to perpetuate 

themselves by the misuse of corporate proxies. 

Insiders having little or no substantial interest in the 

properties they manage have often retained their 

control without an adequate disclosure of their 

interest and without an adequate explanation of the 

management policies they intend to pursue. Insiders 

have at times solicited proxies without fairly 

informing the stockholders of the purposes for which 

the proxies are to be used and have used such proxies 

to take from the stockholders for their own selfish 

advantage valuable property rights. Inasmuch as only 

the exchanges make it possible for securities to be 

widely distributed among the investing public, it 

follows as a corollary that the use of the exchanges 

should involve a corresponding duty of according to 

shareholders fair suffrage. For this reason the 

proposed bill gives the . . . Commission power to 

control the conditions under which proxies may be 

solicited with a view to preventing the recurrence of 

abuses which have frustrated the free exercise of the 

voting rights of stockholders.104 

The above quotes from section 14’s legislative history are 

viewed by commentators as amenable to two very different 

interpretations: “(1) [I]t may suggest a role for shareholders 

as decision makers with respect to corporate policy, or (2) it 

may simply direct that shareholders receive information 

about corporate policies and objectives in addition to 

operating results.”105 We believe this legislative history 

reflects that Congress was most likely focused on providing 

disclosure to voting stockholders for the purpose of enhancing 

the quality of their voting. Nonetheless, the quotes reflect a 

 

103 Id. 
104 Id. at 13–14. 
105 Jill E. Fisch, From Legitimacy to Logic: Reconstructing Proxy 

Regulation, 46 VAND. L. REV. 1129, 1179 (1993). 



  

No. 3:1147] CREATING A CORPORATE PUBLIC SQUARE 1175 

strong belief that proxy voting enables owner concerns to be 

reflected in voting rather than just the interest of managers, 

a thesis advanced in this Article. The 1934 House Report’s 

concern that management’s interest is less than that of the 

firm’s owners suggests the use of disclosures through the 

proxy mechanism as an antidote for any misalignment of 

interests; our view is the dialogue fostered in the virtual 

public square by Rule 14a-8 can breed not only transparency 

of management’s vision but better alignment of management 

and shareholder interests, one of the initial purposes of the 

proxy rule. Thus, as we will see, the SEC reflects this broader 

view, albeit in a disclosure-oriented context. 

The SEC’s views on the rationale for the rule have evolved 

over time. When the SEC issued the shareholder proposal rule 

in 1942, it was numbered Rule X-14A-7.106 It required that 

stockholders making proposals for action which management 

opposed must be allowed to include not more than one 

hundred words to set forth their position in the proxy 

statement.107 Since the inaugural shareholder proposal rule 

 

106 General Rules and Regulations, Securities Act of 1934, 7 Fed. Reg. 

10,655, 10,656 (1942). 
107 Id. The full text of Rule x-14A-7 provided: 

In the event that a qualified security holder of the issuer 

has given the management reasonable notice that such 

security holder intends to present for action at a meeting of 

security holders of the issuer a proposal which is a proper 

subject for action by the security holders, the management 

shall set forth the proposal and provide means by which 

security holders can make a specification as provided in § 

240.14a-2 [Rule X-14A-2]. Further, if the management 

opposes such proposal, it shall, upon the request of such 

security holder, include in its soliciting material the name 

and address of such security holder and a statement of such 

security holder setting forth the reasons advanced by him 

in support of such proposal: Provided, however, That a 

statement of reasons in support of a proposal shall not be 

longer than 100 words and Provided further, That such 

security holder and not the management shall be 

responsible for such statement. For the purposes of this 

rule notice given more than thirty days in advance of a day 

corresponding to the date on which proxy soliciting 



  

1176 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 

predated the Administrative Procedures Act and its call for 

rigor in connection with promulgating rules,108 the SEC did 

not explain the background, purpose, or operation of this 

shareholder proposal rule in its 1942 release. An intuitive 

explanation for the rule is that of disclosure; a company 

seeking proxies to be voted on any matter that may arise at 

the upcoming meeting commits a glaring omission in failing 

to disclose a matter to be voted on that it is aware will be 

submitted by a shareholder. Given the rhetoric in the 

preceding quotes from Senate and House reports regarding 

the importance of managers being accountable to 

shareholders in their management of the firm, especially the 

characterization of disclosure as protection of the shareholder 

voting franchise, the SEC naturally linked the need for 

disclosure of a proposal to be voted on at an upcoming meeting 

to management’s request from shareholders for a proxy to vote 

on any matter at that meeting. 

Subsequent SEC and judicial developments similarly 

supported a broad mission for Rule 14a-8. In 1976, the SEC 

proposed amendments to clarify several requirements 

applicable to proponents.109 The 1976 release stated, “Section 

14(a) of the Exchange Act . . . . was enacted to promote 

corporate suffrage and to limit those situations in which 

public corporations are controlled by a small number of 

 

material was released to security holders in connection 

with the last annual meeting of security holders shall, 

prima facie, be deemed to be reasonable notice. 

Id. 
108 The Administrative Procedures Act was signed into law in 1946. 

Administrative Procedures Act, Pub. L. No. 79-404, 60 Stat. 237 (codified as 

amended in scattered sections of 5 U.S.C.). 
109 Proposals by Security Holders, Exchange Act Release No. 12,598, 

Investment Company Act Release No. 9343, 41 Fed. Reg. 29,982, 29,984 

(proposed July 20, 1976) (to be codified at 17 C.F.R. pt. 240). The 

amendments were officially adopted on December 3, 1976. Adoption of 

Amendments Relating to Proposals by Security Holders, Exchange Act 

Release No. 12,999, Investment Company Act Release No. 9539, 41 Fed. 

Reg. 52,994, 52,994 (Dec. 3, 1976) (to be codified at 17 C.F.R. pt. 240). 



  

No. 3:1147] CREATING A CORPORATE PUBLIC SQUARE 1177 

persons.”110 The release further quoted from what would 

become a highly influential decision of the D.C. Circuit, 

Medical Committee for Human Rights v. SEC, stating that 

“the overriding purpose of Section 14(a) ‘is to assure to 

corporate shareholders the ability to exercise their right—

some would say their duty—to control the important decisions 

which affect them in their capacity as stockholders and 

owners of the corporation.’”111 

The scope of the SEC’s authority under section 14(a), 

however, was later qualified in Business Roundtable v. SEC, 

a case regarding the SEC’s reliance on the provision to impose 

limits on the listing of dual-class voting structures.112 The 

D.C. Circuit upheld the plaintiff’s claim the SEC lacked the 

statutory authority under section 14(a) to address dual-class 

voting shares as a way of promoting fair corporate suffrage.113 

According to the court, Congress authorized the SEC to 

regulate the proxy process primarily to ensure that 

shareholders could exercise their votes on an informed 

basis.114 Although the court acknowledged the SEC’s 

authorization to enact regulations to promote “fair corporate 

suffrage,” the court nonetheless concluded that Congress 

intended the regulations to bear “almost exclusively on 

disclosure” as the means of promoting fair corporate 

suffrage.115 Because Business Roundtable addresses only the 

authority of the SEC to proscribe dual-class voting, it did not 

change the state-law based right of shareholders to submit 

proposals for consideration by the shareholders at a 

forthcoming meeting or for that matter whether a shareholder 
 

110 Proposals by Security Holders, 41 Fed. Reg. at 29,984 (citing S. REP. 

NO. 73-1455, at 12 (1934) and H.R. REP. NO. 73-1383, at 13–14 (1934)). 
111 Id. (quoting Med. Cmt. For Human Rts. v. SEC, 432 F.2d 659, 680–

81 (D.C. Cir. 1970), vacated, 404 U.S. 403 (1972)). 
112 Bus. Roundtable v. SEC, 905 F.2d 406 (D.C. Cir. 1990). 
113 Id. at 408. 
114 Id. at 410. 

115 Id. (“Proxy solicitations are, after all, only communications with 

potential absentee voters. The goal of federal proxy regulation was to 

improve those communications and thereby to enable proxy voters to control 

the corporation as effectively as they might have by attending a shareholder 

meeting.”). 



  

1178 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 

proposal involving dual-class voting is a proper subject under 

Rule 14a-8. This state-based right can be understood to imply 

that a proposal must be included on the firm’s proxy 

statement. Thus, Business Roundtable posed little threat to 

the validity of Rule 14a-8. The SEC has continued to justify 

its rulemaking as, at least partially, driven by the goal of 

promoting fair corporate suffrage. For instance, in 1992, the 

SEC proposed amendments to Rule 14a-8 to facilitate 

shareholder communication and enhance informed proxy 

voting, and to reduce the cost of compliance with the proxy 

rules.116 In explaining its proposal, the SEC stated, “the 

Commission has focused on the role of its proxy and disclosure 

rules in impeding shareholder communication and 

participation in the corporate governance process, in order to 

further Congress’ intent to assure fair, informed and effective 

shareholder suffrage.”117 

However, in 1997, the SEC, recasting Rule 14a-8 in a 

question & answer format, emphasized shareholder 

communication rather than fair suffrage as the rule’s guiding 

purpose. 

Rule 14a8 provides, and then regulates, a channel of 

communication among, and between shareholders and 

companies. It is not the only avenue for 

communication, since a shareholder may undertake 

an independent proxy solicitation or may seek 

informal discussions with management or other 

shareholders outside the proxy process. Rule 14a-8 is 

popular because it provides an opportunity for any 

shareholder owning a relatively small amount of the 

company’s shares to have his or her own proposal 

placed alongside management’s proposals in the 

 

116 Regulations of Communications Among Securityholders, Exchange 

Act Release No. 30,849, Investment Company Act Release No. 18,803, 51 

SEC Docket 1208, 1224 (proposed June 23, 1992) (to be codified at 17 C.F.R. 

pt. 240). 
117 Id. at 1226. 



  

No. 3:1147] CREATING A CORPORATE PUBLIC SQUARE 1179 

company’s proxy materials for presentation to a vote 

at an annual or special meeting of shareholders.118 

In other words, the SEC justified the shareholder proposal 

rule as a means of facilitating small shareholder 

communication amongst themselves and with management. 

The SEC continued to cite “fair corporate suffrage” as a 

goal of the rule in its 2007 proposals concerning bylaw 

proposals for shareholder nominations of directors and 

electronic shareholder forums.119 The SEC observed that 

Congress intended that Section 14(a) give the 

Commission “the power to control the conditions 

under which proxies may be solicited,” and that this 

power be exercised “as necessary or appropriate in the 

public interest or for the protection of investors.” 

Because the Commission’s authority under Section 

14(a) encompasses both disclosure and proxy 

mechanics, the proxy rules have long governed not 

only the information required to be disclosed to ensure 

that shareholders receive full disclosure of all 

information that is material to the exercise of their 

voting rights under state law and the corporation’s 

charter, but also the procedure for soliciting 

proxies.120 

More recently, in 2019, when the SEC proposed 

amendments to proponents’ eligibility requirements and 

 

118 Amendments to Rules on Shareholder Proposals, 62 Fed. Reg. 

50,582 (proposed Sept. 18, 1997) (to be codified at 17 C.F.R. pt. 240) 

(emphasis added). The SEC finally modified the rule into a question & 

answer format in 1998. Amendments to Rules on Shareholder Proposals, 63 

Fed. Reg. 29,106 (May 28, 1998) (to be codified at 17 C.F.R. pt. 240). 
119 Shareholder Proposals, 72 Fed. Reg. 43,466 (proposed Aug. 3, 2007) 

(to be codified at 17 C.F.R. pt. 240). 
120 Id. (footnotes and citations omitted) (first quoting H.R. REP. NO. 73-

1383, at 14 (1934); and then quoting 15 U.S.C. § 78n(a) (2006)) The SEC’s 

2007 release cited comments from Professor John C. Coffee Jr., who said 

that “Section 14(a) ‘does not focus exclusively on disclosure; rather, it 

contemplates SEC rules regulating procedure in order to grant shareholders 

a “fair” right of corporate suffrage.’” Id. at 43,467 n.12 (quoting John C. 

Coffee Jr., Corporate Securities; Federalism and the SEC’s Proxy Proposals, 

231 N.Y.L.J. 5 (March 18, 2004)). 



  

1180 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 

proposal number,121 the SEC emphasized that the proxy 

solicitation process has become the forum within which 

shareholder suffrage occurs: 

Under state corporate law, shareholders have the 

right to vote their shares to elect directors and to 

approve or reject major corporate transactions at 

shareholder meetings, and shareholders may appoint 

proxies to vote on their behalf at such meetings. 

Because most shareholders do not attend public 

company shareholder meetings in person and, 

instead, vote their shares by the use of proxies that 

are solicited before the shareholder meeting takes 

place, the proxy solicitation process rather than the 

shareholder meeting itself has become the “forum for 

shareholder suffrage.”122 

Our view for a SEC-created town square rests on the 

reality that the proxy solicitation has effectively replaced the 

in-person exchanges that once occurred among 

shareholders.123 Moreover, the SEC’s view in the above quote 

is consistent with the broad nature of our corporate public 

square idea: The shareholder proposal rule facilitates 

dialogue among shareholders of all sizes as well as greater 

awareness within the managerial and investor communities 

of an ever evolving range of issues, including the intensity of 

beliefs on those issues. As a communication device, it 

distributes information among shareholders that enriches 

their understanding of the corporation’s operations. As such, 

proposals thereby enrich the environment in which 

shareholders exercise their right of suffrage. 

 

121 Proposing Release, supra note 46. 
122 Id. at 66,458–59 (emphasis added) (footnotes and citation omitted) 

(quoting Proposed Amendments to Rule 14a-8 Under the Securities 

Exchange Act of 1934 Relating to Proposals by Security Holders 47 Fed. 

Reg. 47,420, 47,421 (proposed Oct. 26, 1982) (to be codified at 17 C.F.R. pt. 

240); Concept Release on the U.S. Proxy System, 75 Fed. Reg. 42,982, 42,984 

(proposed July 10, 2010) (to be codified at 17 C.F.R. pts. 240, 270, 274, 275); 

and Roosevelt v. E. I. Du Pont de Nemours & Co., 958 F.2d 416, 422 (D.C. 

Cir. 1992)). 
123 See id. 



  

No. 3:1147] CREATING A CORPORATE PUBLIC SQUARE 1181 

C. Analysis of the Legislative History and Policy 
Justifications for Rule 14a-8 

As discussed below, commentators differ over whether 

Congress’ objectives in enacting section 14(a) were limited to 

furthering disclosure or also included promoting fair corporate 

suffrage.124 Proponents of the rule tend to cite to the House 

Report, whereas detractors favor the Senate Report as 

summarized in the next section. 

1. Legislative History Debate 

Relying on the limited legislative materials examined 

above,125 several commentators argue the rule is limited to 

increasing disclosure in connection with the proxy process or 

beyond,126 while others claim that the rule authorizes the SEC 

to address questions of substantive fairness in the voting 

 

124 See generally Susan W. Liebeler, A Proposal to Rescind the 

Shareholder Proposal Rule, 18 GA. L. REV. 425 (1984) (arguing disclosure 

only); George W. Dent, Jr., SEC Rule 14a-8: A Study in Regulatory Failure, 

30 N.Y. L. SCH. L. REV. 1 (1985) (arguing disclosure only); Patrick J. Ryan, 

Rule 14a-8, Institutional Shareholder Proposals, and Corporate Democracy, 

23 GA. L. REV. 97 (1988) (discussing different views of the rule); Milton V. 

Freeman, An Estimate of the Practical Consequences of the Stockholder’s 

Proposal Rule, 34 U. DET. L.J. 549 (1957) (arguing for promotion of corporate 

democracy); David C. Bayne, The Basic Rationale of Proper Subject, 34 U. 

DET. L.J. 575 (1957) (arguing for promotion of corporate democracy); Frank 

D. Emerson & Franklin C. Latcham, The SEC Proxy Proposal Rule: The 

Corporate Gadfly, 19 U. CHI. L. REV. 807 (1952) (arguing for promotion of 

corporate democracy). At least one scholar has concluded that, “[t]he 

statutory language and legislative history are ambiguous as to whether the 

SEC is authorized to enact rules with a substantive effect on corporate 

governance or simply to implement disclosure requirements.” Fisch, supra 

note 105, at 1179. 
125 See supra Section III.B. 
126 See e.g., Stephen M. Bainbridge, Redirecting State Takeover Laws 

at Proxy Contests, 1992 Wis. L. Rev. 1071, 1118 (1992) (“A federal right to 

full disclosure and fair procedures does not equal a federal right to wage 

proxy contests. Rather, the legislative history reflects a congressional desire 

to do nothing more than enable shareholders to make effective use of 

whatever voting rights they possess by virtue of state law.”). 



  

1182 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 

process to promote “corporate democracy.”127 The “disclosure 

only” oriented commentators argue that the shareholder 

proposal rule itself developed as an adjunct to the SEC’s 

disclosure requirements,128 mainly basing their arguments on 

the misuse of proxy rules described in 1934 Senate Report. 

For example, Professor Bainbridge supports the 

disclosure-oriented justification, claiming that Congress did 

not intend to regulate substantive issues such as when 

shareholders are entitled to vote; instead it sought to ensure 

shareholders receive full disclosure and procedural fairness 

when state law gives them an opportunity to vote.129 He 

argues that Congress did not intend the SEC, in regulating 

the solicitation of proxies, to affect the substantive voting 

rights of shareholders.130 In his view, although the 1934 

House Report makes reference to fair corporate suffrage, 

nothing in it concerned substantive aspects of shareholders’ 

voting rights; the sole focus is on providing full disclosure and 

fair procedures.131 Bainbridge believes that when Congress 

spoke of fair corporate suffrage, it meant that shareholders 

should be allowed to make an independent, informed decision 

when asked to exercise the franchise, leaving it to the states 

to determine when shareholders are entitled to exercise the 

franchise as well as other substantive corporate governance 

questions.132 He concludes that the legislative history reflects 

a congressional desire to do nothing more than enable 

 

127 See e.g., Ryan, supra note 124, at 103, 140 (discussing different 

views of the rule); Schwartz & Weiss, supra note 24, at 638–39 (“[T]he rule 

is designed to provide shareholders an opportunity to express their point of 

view on issues affecting the corporation for the purpose either of holding 

management accountable or of influencing management’s actions with 

respect to those issues). 
128 See generally Note, Liberalizing SEC Rule 14a-8 Through the Use 

of Advisory Proposals, 80 Yale L.J. 845, 847–848 (1971); Fisch, supra note 

105, at 1179. 
129 Stephen M. Bainbridge, supra note 126, at 1112. 
130 Id. at 1116. 
131 Id. at 1111–12. 
132 Id.at 1116. 



  

No. 3:1147] CREATING A CORPORATE PUBLIC SQUARE 1183 

shareholders to make effective use of whatever voting rights 

they possess by virtue of state law.133 

In contrast to this “disclosure only” view are commentators 

who emphasize the 1934 House Report’s statement that, “Fair 

corporate suffrage is an important right that should attach to 

every equity security bought on a public exchange.”134 This 

group of commentators argue the House Committee on 

Interstate and Foreign Commerce understood the importance 

of shareholders’ role in corporate governance.135 The 1934 

House Report indicates that proxy regulation demanded a 

new system of “fair corporate suffrage,” which would prevent 

improper self-perpetuation by management and limit abuse 

by those in control.136 Thus, Professor Ryan concludes from 

the legislative history that the SEC’s proxy regulation power 

was designed to protect the shareholder voice in control of the 

corporation,137 making it essential to the successful 

functioning of corporate democracy.138 In this view, “[t]he 

shareholder proposal rule gives shareholders what amounts 

to a right to weigh in and influence management.”139 

In a highly significant article, Professors Schwartz and 

Weiss develop a broad interpretation of Rule 14a-8, arguing 

that if the SEC only intended to increase disclosure, it could 

accomplish that goal by a more simple disclosure requirement 

to the company.140 “The more detailed requirements of the 

shareholder proposal rule,” they state, “reflect an effort on the 

part of the SEC to act in what it deems ‘the public interest.’”141 

We endorse this view and find it consistent with our view of 

the Rule as creating a corporate public square. Schwartz and 

 

133 Id. at 1117. 
134 Ryan, supra note 127, at 139 (quoting H.R. REP. NO. 73-1383, at 13-

14 (1934)). 
135 Id. at 140 (describing shareholder participation in the governance 

of the company in the legislative record). 
136 Id. at 139 (quoting H.R. REP. NO. 73-1383, at 13-14 (1934)). 

137 Id. at 140. 
138 Id. at 97. 
139 Haan, supra note 29, at 291 (emphasis omitted). 
140 Schwartz & Weiss, supra note 24, at 638. 
141 Id. 



  

1184 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 

Weiss further reason that “the shareholder proposal rule 

provides a relatively unique opportunity to question 

management” and improve management’s action by 

compelling it to respond more meaningfully to shareholder 

questions and to publish the question and response.142 

We believe that the corporate public square is in the public 

interest and will benefit all of the corporation’s stakeholders 

as well as the public because it will foster greater 

communication amongst them and corporate management. 

2. Theoretical and Policy Arguments 

In addition to the legislative history debate, there are a 

number of policy and theoretical arguments to consider.143 

From a theoretical perspective, shareholders have voting 

rights for a number of good reasons: the shareholder vote can 

play a monitoring role;144 it can provide a “superior 

information aggregation device for private information held 

by shareholders when there is uncertainty about the correct 

decision;”145 and it provides “an efficient mechanism for 

aggregating heterogeneous preferences when the decision 

differentially affects shareholders.”146 Under this view, 

shareholders should vote on low-dollar immediate value 

issues, such as Rule 14-8 shareholder proposals, where the 

subject may have an effect on the long-term value of the 

 

142 Id. at 641; see also Freeman. supra note 124, at 551 (“[M]anagement 

must prepare and circulate a formal justification of its own position in 

opposition to the shareholder”). Critics have questioned whether 

shareholders are really ever asking questions seeking an answer. See Dent 

Jr., supra note 124, at 17 (“[T]he proponent is rarely seeking an answer to 

a question.”). 
143 For an extensive review of the academic literature on shareholder 

proposals, see Haan, supra note 29, at 288 n.101. 
144 Edelman et al., supra note 5, at 1378. The monitoring function of 

shareholder voting is limited to issues that affect the stock price 

immediately or in the long run, where the board is conflicted or likely to be 

captured, and the benefits of voting exceed its costs. This rationale will not 

apply to issues with little impact on the long-run value of the company. Id. 

at 1380. 
145 Id. at 1378. 
146 Id. 



  

No. 3:1147] CREATING A CORPORATE PUBLIC SQUARE 1185 

firm.147 Because empirical evidence on whether shareholder 

votes on Rule 14a-8 proposals enhance long-run value is 

mixed,148 we do not rely upon the monitoring rationale as a 

theoretical justification for the Rule. 

However, the preference aggregation justification for the 

vote supports Rule 14a-8 because “a shareholder vote acts as 

a measure of the intensity of shareholders’ interests, more 

accurately conveying to the board the concerns and beliefs of 

the shareholders.”149 Even though shareholder proposals are 

often technically advisory, boards often implement proposals 

that garner a majority of shareholder votes.150 In any case, in 

considering future actions, the board will be in a better 

position to balance the interests of the firm’s stakeholders so 

that management’s decision-making may be improved.151 

Others also credit Rule 14a-8 with providing valuable 

information. Professor Freeman believes the rule provides 

shareholders an opportunity to express their point of view on 

issues that impact the corporation for the purpose either of 

holding management accountable or of influencing 

management’s actions with respect to those issues.152 

Similarly, Professor Ryan points out that the rule permits the 

expression of shareholder opinions about corporate affairs 

that differ from management’s views, and that it serves to 

 

147 Id. at 1421. 
148 See He et al., supra note 48, at 1. 
149 Thomas & Edelman, supra note 23. 

150 Nickolay Gantchev & Mariassunta Giannetti, The Costs and 

Benefits of Shareholder Democracy: Gadflies and Low-Cost Activism, 34 

REV. FIN. STUD. 5629, 5632 (2020). However, there are still proposals that 

receive a majority of shareholder votes that are not then implemented by 

the company. See Yonca Ertimu, Fabrizio Ferri & Stephen R. Stubben, 

Board of Directors’ Responsiveness to Shareholders: Evidence from 

Shareholder Proposals, 16 J. CORP. FIN. 53, 54 (2010) (finding that, among 

S&P 1500 firms in 2004, forty percent of majority-vote proposals were 

implemented). 
151 See Thomas & Edelman, supra note 23; Ryan, supra note 124, at 

112. 
152 Freeman, supra note 124, at 556. 



  

1186 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 

engage the corporate players in a dialogue about broader 

corporate, social and economic concerns.153 

Another benefit Rule 14a-8 accords is it provides the 

individual shareholder the right to demand and receive from 

management a public justification of its action.154 

Shareholder proposals “elicit[] a reasonably full exposition of 

management’s point of view concerning the issues raised by 

the shareholder proponents.”155 As Professor Ryan notes, 

“[u]nlike other sources of information available to 

management, such as stock market performance, shareholder 

proposals are infrequent and harder to overlook or 

misinterpret.”156 He also reasons, “a shareholder proposal, 

and management’s response to it, may force management to 

articulate its reasons for pursuing a particular policy.”157 This 

may improve managerial decision-making by “facilitating 

information gathering, analysis, and dissemination.”158 

As supporters of Rule 14a-8, Professors Schwartz and 

Weiss think that Rule 14a-8 is justified by its constructive 

impact on corporate behavior.159 They argue that “[i]n 

numerous instances, corporations have taken actions that 

were either tied directly to or seemingly stimulated by 

shareholder proposals.”160 They also claim that Rule 14a-8, 

when compared with the “Wall Street Rule” (i.e., if you 

disagree with management, you should sell your stock), 

provides the interested investor with an opportunity to voice 

its concerns while keeping its stock.161 

 

153 Ryan, supra note 124, at 99, 181. 

154 Freeman, supra note 124, at 551. 
155 Schwartz & Weiss, supra note 24, at 641. 
156 Ryan, supra note 124, at 112. 
157 Id. 
158 Haan, supra note 29, at 292. 
159 Schwartz & Weiss, supra note 24, at 642. 

160 Id. at 642–43. 
161 Id. at 642. Professor Liebeler notes that “[t]o the extent that 

stockholders attempt to use Rule 14a-8 instead of selling their shares, the 

market for corporate control works less effectively”. Liebeler, supra note 

124, at 448. 



  

No. 3:1147] CREATING A CORPORATE PUBLIC SQUARE 1187 

The legislative history and academic commentary about 

Rule 14a-8 suggest that its purpose is far bigger than just 

ensuring fair voting. We believe that Rule 14a-8, among other 

things, offers a mechanism for raising issues to be considered 

within the firm’s boardroom and executive suite that 

otherwise may not be focused upon. The shareholder proposal 

rule thereby enriches the information environment in which 

management operates and by which the board oversees 

management’s stewardship. The latter is an especially 

important contribution in an era in which ESG is enjoying 

such an important role among investors.162 

In the next Part, we provide an overview of the empirical 

literature on how Rule 14a-8 has been used in recent years. 

IV. INSIGHTS FROM EMPIRCAL STUDIES OF RULE 
14A-8 

Not surprisingly, experience under Rule 14a-8 has been 

extensively studied.163 Indeed, it is a natural target for 

empirical investigation as there is a diverse cast of proponents 

and firms targeted by proposals, a broad range of subjects 

covered by proposals that are nonetheless amenable to 

classification in discrete but broad categories, and an equally 

observable range of outcomes for proposals.164 Resolution 

proponents typically are individuals, labor pension funds, or 

financial institutions.165 A subset within individual 

proponents are so-called gadflies, an important group as they 

regularly lodge a disproportionate percentage of all 

proposals.166 A recent study by Gantchev and Giannetti of 

shareholder proposals raised between 2003 and 2014 found 

 

162 For discussion, see supra note 28 and accompanying text. 
163 For a recent survey article of the empirical literature, see Matthew 

R. Denes, Jonathan M. Karpoff & Victoria B. McWilliams, Thirty Years of 

Shareholder Activism: A Survey of Empirical Research, 44 J. CORP. FIN. 

405 (2017). 

164 See generally Luc Renneboog & Peter G. Szilagyi, The Role of 

Shareholder Proposals in Corporate Governance, 17 J. CORP. FIN. 167 

(2011). 
165 Id. at 170–171. 
166 Gantchev & Giannetti, supra note 150, at 5630. 



  

1188 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 

three gadflies initiated nearly half of all individual sponsored 

proposals.167 Among the institutional category, the same 

study found public pension funds enjoy greater support for 

their proposals, on average, though they bring forward fewer 

proposals than labor pension funds.168 Not surprisingly, 

investment companies do not resort to Rule 14a-8 due to 

potential conflicts of interests.169 Larger corporations are 

subject to a disproportionate share of all shareholder 

proposals.170 Among the outcomes observed are the 

withdrawal of a proposal, the company seeking an SEC no-

action letter, the grant or denial of such a letter, or an actual 

shareholder vote on the proposal.171 

How has the Rule been used in the past and by whom? 

Several empirical studies have shown that the shareholder 

proposal rule has played a positive role in corporate 

governance reform. One recent study by Kosmas 

Papadopoulos of Institutional Shareholder Services (ISS) 

shows that shareholder proposals have spurred the adoption 

of a variety of governance best practices over the past three 

decades.172 Shareholder proposal campaigns enabled 

corporate practices such as annual director elections, majority 

vote rules for director elections, shareholder approval for 

poison pills, and proxy access bylaws to become common 

practice.173 In contrast, approximately twenty-five percent of 

shareholder proposals relate to environmental and social 

issues, for which shareholder support, although growing 

rapidly, nonetheless rarely exceeds fifty percent.174 There is 

 

167 Id. at 5637 tbl.1. 
168 Id. 
169 Id. at 11. 
170 Id. at 5640 tbl.2 (finding statistically significant correlation 

between market capitalization and probability of being targeted by 

shareholder proposals). 
171 Randall S. Thomas and Kenneth J. Martin, The Effect of 

Shareholder Proposals on Executive Compensation, 67 U. CIN. L. REV. 1021, 

1045 (1999). 
172 Papadopoulos, supra note 52. 
173 Id. 
174 He et al., supra note 48, at 1. 



  

No. 3:1147] CREATING A CORPORATE PUBLIC SQUARE 1189 

mixed evidence on the question of whether these 

environmental and social proposals have led to changes of 

corporate practices or firm value.175 

One prominent recent study of shareholder proposal 

proponents and their success is by Professors Renneboog and 

Szilagyi. They analyzed 2,436 proposals submitted between 

1996 and 2005.176 Among other things, they found that: 

i. union pension funds were the most prolific with 810 

submissions, including 506 between 2003 and 2005;177 

ii. public pension funds submitted 116 proposals; 

iii. investment funds submitted 39 proposals; 

iv. coordinated investor groups such as the Investor Rights 

Association of America submitted 170 proposals; 

v. socially responsible and religious investors submitted 

112 proposals; and 

vi. the overwhelming majority of the remaining 1189 

proposals were submitted by individuals, who 

dominated the proxy process almost entirely until the 

mid-1980s.178 

The most prominent individual gadfly investors have been 

active for many years and include Evelyn Y. Davis and the 

Chevedden, Rossi, and Gilbert families, who together 

submitted 516 of the 2,436 studied proposals.179 

 

175 Id. at 1 n.1. 
176 Renneboog & Szilagyi, supra note 164, at 170. 
177 A concern with labor fund proposals is evidence they use the 

shareholder proposal rule strategically to garner benefits at the negotiating 

table, launching more proposals during period of contract renewal, and 

dropping the proposals after obtaining benefits at the bargaining table. 

John G. Matsusaka, Oguzhan, Ozbas & Irene Yi, Opportunistic Proposals 

by Union Shareholders, 32 REV. FIN. STUDS. 3215, 3215–16. 
178 Renneboog & Szilagyi, supra note 164, at 170–71. 
179 Id. at 171. There are several other papers that document the 

proponent types for shareholder proposals. See, e.g., Matsusaka et al., supra 

note 179; Gantchev & Giannetti, supra note 150, 5637 tbl.1. For example, 

John G. Matsusaka, Oguzhan Ozbas, and Irene Yi analyze shareholder 

proposals received by Standard & Poor (S&P) 1500 index companies during 

the period 1997-2013. Matsusaka et al., supra note 177, at 3224. They 

categorize proponent types and number of their proposals and find that 

individuals and union pension funds are the most frequent proponents, with 



  

1190 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 

Professors Renneboog and Szilagyi further show that 

takeover-related proposals performed well irrespective of the 

proposal’s sponsor.180 Otherwise, public pension funds and 

investment funds were the most successful in building voting 

coalitions, with an average 44.1% and 42.6% of the votes, 

respectively.181 Union pension funds won a lower share of the 

votes at 35.6%, which may reflect shareholder concerns over 

their political or social agendas, but is also consistent with the 

greater diversity of their proposal objectives.182 The 

percentage votes achieved by coordinated investor groups and 

socially responsible and religious investors were 29.7% and 

20.4%, respectively.183 Finally, individual activists attracted 

an average 33.1% of votes cast. However, several gadfly 

investors popular in the business media were very successful 

in gathering voting support, with the Chevedden and Rossi 

families achieving particularly strong voting outcomes.184 

Especially helpful in evaluating not just Rule 14a-8, and 

supportive of our suggestion of orienting the Rule toward 

nurturing a corporate public square, is the recent study by 

Gantchev and Giannetti that used data on 4,878 shareholder 

proposals between 2003 and 2014 for all firms in the Standard 

& Poor’s (S&P) 1500 index.185 The issue that concerns them is 

whether harmful proposals can, despite their effect, receive 

majority support and then destroy shareholder value if they 

are subsequently implemented. In particular, they investigate 

whether gadflies that submit many one-size-fits-all 

shareholder proposals every year are thereby adversely 

affecting targeted firms.186 

They find that firms targeted by individuals do not differ 

in any meaningful way from firms targeted by institutions—

 

public pension funds, religious groups, and socially responsible investors 

also frequent proponents. Id. 
180 Renneboog & Szilagyi, supra note 176, at 172. 
181 Id. 

182 Id. 
183 Id. 
184 Id. 
185 Gantchev & Giannetti, supra note 150. 
186 Id. at 5630. 



  

No. 3:1147] CREATING A CORPORATE PUBLIC SQUARE 1191 

both target firms that are all relatively large and have 

reported low profitability.187 About twenty percent of the 

proposals voted on garnered a majority or greater vote, with 

individuals the most frequent proponents accounting for over 

thirty-five percent of all proposals voted on at meetings.188 

Proposals submitted by individuals were more likely to be 

approved than those submitted by institutions.189 

The study’s authors document that a small group of 

individual gadfly investors submit a disproportionate number 

of proposals. These individual sponsors, such as John 

Chevedden and William Steiner, do not acquire large stakes 

and are not particularly wealthy, but they submit dozens of 

shareholder proposals every year, convinced that “it is the 

right thing to do.”190 Recently, Professors Yaron Nili and Kobi 

Kastiel extolled the virtues of gadflies, reporting that, even 

though gadflies account for 27.3% of all proposals during their 

study period, they were behind 53% of proposals submitted to 

the S&P 1500 that received majority support.191 They also 

found that in nearly two-thirds of the instances in which 

gadfly sponsored proposals received majority support, 

management followed up with a proposal to modify the 

company’s governance terms, a success rate above that of 

 

187 Id. at 5637. 
188 Id. at 5636–37. 
189 There is a conflict in the studies over whether proposals submitted 

by individuals are more likely to pass than proposals submitted by 

institutions. Compare Stuart L. Gillan & Laura T. Starks, Corporate 

Governance Proposals and Shareholder Activism: The Role of Institutional 

Investors, 57 J. FIN. ECON. 275, 288 (2000) (finding proposals sponsored by 

individuals less likely to pass) with Gantchev & Giannetti, supra note 150, 

at 5636 (finding shareholder proposals by individuals more likely to pass). 

The sample period for Gillan & Starks is much earlier than that of the other 

study, suggesting a change in behavior may have occurred over time. 

Compare Gillian & Starks, supra, at 275 (analyzing proposals between 1987 

and 1994) with Gantchev & Giannetti, supra note 150, at 5635 (studying 

proposals between 2003 and 2014). 

190 Gantchev & Giannetti, supra note 150, at 5634. 
191 Kobi Kastiel & Yaron Nili, The Giant Shadow of Corporate Gadflies 

20, 24 (Univ. of Wis. Legal Studs., Working Paper No. 1523, 2020) 

(examining 6,827 shareholder proposals between 2005 and 2018 among the 

S&P 1500). 



  

1192 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 

pension funds.192 Much of the success enjoyed by gadflies is 

attributed to their strategy focusing on standardized 

governance proposals that are recognized to have a good deal 

of salience among institutional investors.193 

However, Gantchev and Giannetti project a much darker 

view of gadflies, reporting that proposals by such active 

individuals receive the lowest percentage of votes across a 

range of types of proposals and only are implemented by 

boards three percent of the time, whereas overall the 

implementation rate for majority-passed proposals is twelve 

percent.194 This is a significant observation as it suggests 

gadflies’ proposals, which, if broadly viewed, can be seen as 

the generic equivalent to that of an institution or non-active 

individual, perform less well in the particular setting because, 

as the authors explain, the proposals submitted by gadflies 

are not tailored to the conditions that surround the targeted 

firm. And this is understood by the stockholders: if the 

gadflies’ proposals obtain majority voting support this 

“trigger[s] sales by informed mutual funds that voted against 

them and, arguably as a consequence, negative abnormal 

returns.”195 They also find that “proposals by [gadflies] 

destroy shareholder value if they are implemented.”196 

However, “there are benefits from the implementation of 

other individuals’ proposals,” and these large benefits must be 

weighed against the costs associated with implemented gadfly 

proposals, “cast[ing] doubt on the desirability of limiting 

individual shareholder proposals.”197 The authors caution the 

 

192 Id. at 25. 

193 Id. at 30–32. 
194 Gantchev & Giannetti, supra note 150, at 5642. The authors argue 

that even this small percentage of proposals destroy value when they are 

implemented, but that boards do so because they fear “the personal 

consequences arising from ISS withhold-vote recommendations, which are 

typically issued when majority-supported proposals are not implemented, 

regardless of their quality.” Id. at 5631. 

195 Id. 
196 Id. at 5630 We note that this study is still a working paper at the 

time of this writing and therefore this conclusion is subject to potential 

revision. 
197 Id. at 5650–51. 



  

No. 3:1147] CREATING A CORPORATE PUBLIC SQUARE 1193 

SEC to weigh both the benefits of the other individuals’ 

proposals against the costs associated with the gadflies’ 

proposals before deciding whether to limit individual 

proposals overall.198 We share this view. 

V. WHAT IS THE REAL PURPOSE OF RULE 14A-8? 
THE CORPORATE PUBLIC SQUARE 

How should we evaluate the worth of a shareholder 

proposal? Answering this question and applying it collectively 

across at least recent experiences under Rule 14a-8 would 

guide us to considering how it may be improved. From the 

multiple foci of the studies reviewed in the preceding Part, we 

can see their authors’ focus on the voting outcome as the 

currency they use to measure the worth of a proposal or even 

its proponent.199 The SEC followed a similar approach in 

supporting the rule changes it adopted in 2019, as it 

emphasized the approved/not approved record proposals had 

before the voting shareholders.200 

We believe there are several reasons why assessing the 

value of Rule 14a-8, and for that matter the worth of any 

reform matter, requires looking beyond the voting outcome. 

For one, it is important to recognize the value associated with 

proposals that are withdrawn by their proponent. Nearly one-

 

198 Id. at 5651. 
199 We also observe that the empiricists’ focus on voting outcomes also 

resonates the general complaint regarding the impacts of Rule 14a-8. Rule 

14a-8 has many policy critics. For example, Professor Dent argues that the 

SEC should not force companies to devote significant resources to 

circulating proposals that have virtually no chance of being adopted. See 

Dent Jr., supra note 124, at 17; Professor Liebeler also notes that there is 

no reason to expect security holders to express their dissatisfaction through 

shareholder resolutions as long as they are able to sell their shares. See 

Liebeler, supra note 124, at 447. 
200 Proposing Release, supra note 46, at 66,484 figs.7A & B, 66,485 

fig.7C, 66,486 figs 8A & B, 66,587 fig.8C (collecting data on proposals 

garnering shareholder approval overall, type of proponent and type of 

proposal). 



  

1194 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 

half of all submitted proposals are withdrawn.201 Opponents 

of the shareholder proposal rule could reason the high 

withdrawal rate reflects a proponent acting, at last, sensibly 

in reaching the conclusion advanced by management that the 

proposal was ill-conceived and not in the interest of the 

company or its shareholders. But there is evidence that the 

withdrawal is a settlement between the proponent and the 

company.202 Where this happens, there is every reason to 

believe the proposal produced more than nothing so that such 

settlements should be weighed in the calculus of the social 

benefits of Rule 14a-8. 

The withdrawal itself, especially as a result of a 

settlement, suggests another benefit, namely facilitating 

shareholder dialogue with the company. That is, the proposal 

itself was the vehicle for dialogue. To be sure, a blockholder 

can be expected to enjoy access to the company’s management 

because of the attention its sizable holdings attract. The 

smaller shareholder lacks this magnetism. On the other hand, 

the withdrawal record among individual shareholders 

suggests to us that a shareholder proposal does fill the void by 

attracting management’s attention. We do not know how often 

withdrawals occur because of negotiations, but strongly 

suspect the number of instances is substantially greater than 

trivial. This at least means that focusing on the win-loss 

voting record before the shareholders understates the value of 

a rule that facilitates proposals, but also means the 

shareholder proposal rule has the additional benefit of 

enabling a dialogue between the corporation and its 

shareholders. Enabling dialogue is empowering for small 

 

201 Id. at 66,478 fig.2 (finding that, in 2018, there were 831 proposals 

of which 123 were omitted, 447 were voted upon, and 261 (31.4%) that were 

withdrawn). 
202 Rob Bauer, Frank Moers & Michael Viehs, Who Withdraws 

Shareholder Proposals and Does It Matter? An Analysis of Sponsor Identity 

and Pay Practices, 23 CORP. GOVERNANCE 472, 477 tbl.1. 484 (2015) (finding 

that over the past few decades there has been a significant increase in the 

number of ESG proposals that are withdrawn because of a settlement 

reached between the proponent and the company). 



  

No. 3:1147] CREATING A CORPORATE PUBLIC SQUARE 1195 

shareholders who lack the gravitas that surrounds a 

blockholder that can earn a meeting with management. 

Resting the worth of Rule 14a-8 on the number of instances 

proposals garner majority support with the stockholders 

further overlooks the arch of history with shareholder votes. 

Dramatic instances exist where practices first advanced as 

shareholder proposals became widely adopted across public 

companies, not because they initially won a majority vote but 

because their proponents’ persistence over a multi-year 

campaign shined a light on the need for reforms that were 

ultimately judged a good development.203 A classic example is 

the movement to separate the positions of CEO and board 

chair. Though the proposal garnered mixed results in 

shareholder votes, firms may choose this course of action even 

without a compelling positive shareholder vote. The point is 

that focusing only on the win-loss record within firms targeted 

by a proposal overlooks the role that proposal has at non-

targeted firms. Thus, the shareholder proposal rule enjoys 

substantial positive externalities, uncaptured by the win-loss 

record, that that must be considered in evaluating its worth. 

We therefore take a more holistic approach and consider 

Rule 14a-8’s potential in light of the broad sweep of 

contemporary corporate governance. There is a broad call for 

corporations to balance the pursuit of shareholder wealth 

against a range of social concerns in which attention is to be 

given to stakeholder interests.204 This cascade of interest is 

joined by calls that management and owners should 

collaborate in pursuing long-term interests rather than short-

term gain.205 The latter has gained a good deal of traction 

 

203 See Rosanna Landis-Weaver, Protecting the Shareholder Proposal 

Process, AS YOU SOW (Nov. 19, 2018), 

https://www.asyousow.org/blog/2018/11/19/sec-shareholder-proxy-process 

[https://perma.cc/G3LC-WYJN] (noting that “support grows slowly” for 

issues addressed in multi-year proposals, which initially “do not receive 

significant shareholder support” but “are no less critical”). 
204 See James D. Cox & Randall S. Thomas, A Revised Monitoring 

Model Confronts Today’s Movement Toward Managerialism, 99 TEX. L. REV. 

1275, 1301 (2021). 
205 Id. at 1294–1295. 



  

1196 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 

across corporate America under the rubric of the New 

Paradigm where on-going dialogue, not confrontational 

battles for control, is prescribed.206 We therefore place the 

future of Rule 14a-8 within this constellation, seeing it as yet 

another medium for the owners’ voice to reach the suites of 

corporate executives. To be sure, there are multiple mediums 

for that voice to be heard and for its impact to be felt. In 

another era, the takeover was the popular method and today 

there are activist investors. Nonetheless, both those forces, 

largely out of economic considerations, often target small 

firms, as the capital needed for a credible threat was too great 

for large firms.207 We can thus see the role of Rule 14a-8 

complementing these more adversarial engagements208 while 

at the same time targeting firms that were less likely to be the 

target of takeovers in the past or of activist investors today. 

Moreover, the data reviewed earlier reflected that a 

significant portion of Rule 14a-8 proposals are by individuals, 

not institutions;209 this comports with the reality that 

individual investors, unlike institutions, cannot undertake 

one-on-one dialogue with company management. And, the 

negligible number of shareholder proposals sponsored by 

mutual funds is consistent with their well-documented 

custom of engaging portfolio companies through direct 

discussion.210 Nonetheless, dialogue between investor and 

management is not as public as a shareholder proposal. 

Hence, proponents of a governance issue or an approach to 

sustainability who wish to shine a light on the issue can reach 

a much broader audience via Rule 14a-8 than one-on-one 

dialogue with a company’s management. That is, the proposal 

and the shareholder vote that flow from a proposal launched 

under Rule 14a-8 enjoy a broad audience, one that is certainly 

 

206 Id. at 1297–1298. 
207 Alon Brav et al., Hedge Fund Activism, Corporate Governance, and 

Firm Performance, 63 J. FIN. 1729, 1747, 1752 (2008). 

208 Gantchev & Giannetti, supra note 150, at 5639 (shareholder 

proposals are “an important complementary mechanism of external 

corporate governance.”). 
209 See supra Part IV. 
210 See id. 



  

No. 3:1147] CREATING A CORPORATE PUBLIC SQUARE 1197 

more inclusive than that engaging in a dialogue with 

management. Moreover, the transparency of the Rule 14a-8 

process, not the least of which is the proxy solicitation process, 

affords the proponent much more hydraulic pressure than can 

ever arise in the one-off consultation process. 

Rule 14a-8 therefore should be seen as a public, not a 

private, forum. It is now very much a forum where 

management and investors can witness the contesting visions 

among investors and between investors and management. 

Such exchanges promote discussion, reflection, study, and the 

evolution of corporate governance as well as the mission of the 

company. In an era of rising interest in both ESG and 

company responsiveness to stakeholders as well as 

shareholders, there is a heightened need for evolving values 

among shareholders to be broadly communicated to 

management, shareholders, and the public. The vision is that 

the shareholder proposal rule is the corporate public square. 

VI. CONCLUSION 

In our critique of assessing the contributions of Rule 14a-8 

by focusing on the level of support garnered in the voting on a 

proposal we observed that the value of Rule 14a-8 is much 

broader as it must be understood as a communication 

mechanism among the proponent, the corporation and its 

management, the company shareholders, the corporation to 

its various non-shareholder stakeholders, and to boardrooms 

and investors everywhere. It enables shareholders to 

communicate within these networks the intensity of feeling 

and beliefs on a breadth of concerns. Just as the ancient 

Greeks and Romans, and more recently Europeans and 

Americans, built their cities around the public square, from 

the beginning of its classical conception, the public square is 

featured as a core element of public discourse in urban life.211 

 

211 As Michael Kimmelman writes in City Squares, “a successful square 

is not just about light, air, proportion, and people. It must also give form to 

some shared notion of civic identity.” See Michael Kimmelman, Culture: the 

Power of Place: Introduction, in CITY SQUARES: EIGHTEEN WRITERS ON THE 



  

1198 COLUMBIA BUSINESS LAW REVIEW [Vol. 2021 

Rule 14a-8 should be viewed as creating the functional 

equivalent of the public square where corporate management 

and directors can take the pulse of their shareholders and 

even extrapolate from that measurement the views of various 

stakeholders, and more generally the public, as part of their 

ongoing processing of information about the environment to 

be navigated to conduct the firm’s business. 

The legislative history and academic commentary about 

the Rule suggest that it embraces a bigger role than 

regulating only the mechanical action of shareholder voting. 

The shareholder proposal rule serves many other functions as 

well: It informs the board about the views of its investors and 

stakeholders; it promotes active investor involvement with 

the company; it can lead to valuable corporate governance 

changes; and it provides the board with alternative views of 

the firm’s objectives so that it does not become over-reliant on 

corporate management. Each of these we believe are highly 

valuable contributions to the board’s information base. 

We believe that the Rule can perform all of these functions 

and thus facilitate the opening of a corporate public square 

while remaining consistent with its legislative history and the 

SEC’s interpretation of that history over time. However, if 

necessary, we would ask Congress to authorize the Rule’s use 

to facilitate the creation of a corporate public square. 

Finally, we are concerned that gadfly investors are making 

an excessive number of proposals that decrease the value of 

targeted firms. At least one empirical study has found that 

gadfly proposals that obtain majority voting support and are 

implemented by the targeted firms lead to negative effects on 

firm value.212 However, other individual investors’ proposals 

appear to be value enhancing so we cannot endorse overall 

cutbacks on proposals by all individual proponents. We urge 

the SEC to take a cautious approach to this issue and to 

generate studies of the comparative value of shareholder 

proposals by the different proponents before taking action to 

directly limit individual proposals. 
 

SPIRIT AND SIGNIFICANCE OF SQUARES AROUND THE WORLD 1, 8 (Catie Marron 

ed., 2016). 
212 See Gantchev & Giannetti, supra note 150, at 5630.