Here’s an excerpt from this Cooley Alert penned by Beth Sasfai, Brad Goldberg, Michael Mencher, Vince Flynn, Victoria Peluso, Reid Hooper and Justin Kisner:
“As of June 1st, companies had submitted 170 Rule 14a-8(j) exclusion notices under the SEC staff’s current no-action policy since its announcement in November 2025, compared to 360 no-action requests submitted during the comparable period of the prior season (November 2024 through May 2025). Even accounting for the year-over-year decline in proposal submissions, the magnitude of this decrease – a 53% reduction in exclusion-related filings against a 15% reduction in proposal submissions – suggests that a meaningful number of companies that would have sought no-action relief in prior years elected not to pursue exclusion under the SEC staff’s revised approach.
Companies’ decisions appear to have reflected a probability/magnitude assessment of the risks associated with unilateral exclusion. For many companies, even a relatively low probability of costly shareholder litigation (along with the negative publicity such litigation can generate), together with the prospect of adverse proxy advisor recommendations against individual directors, was sufficient to outweigh the benefits of exclusion, given the severity of those potential consequences. While anticipated proxy advisor opposition largely failed to materialize, litigation challenging proposal exclusions emerged later in the season, as discussed below.
The 170 Rule 14a-8(j) exclusion notices submitted this season included a mix of substantive and procedural exclusion bases, as reflected below. Notably, however, companies relied considerably less on certain substantive arguments requiring more subjective judgments. This trend was particularly evident for ordinary business and micromanagement exclusions under Rule 14a-8(i)(7), which appeared in only 33% of Rule 14a-8(j) exclusion notices this season, down markedly from the 56% rate observed in 2025 no-action requests. This may reflect a broader inclination among companies to adopt a more conservative posture under the SEC staff’s current no-action policy, favoring more objective bases for exclusion.
This season’s Rule 14a-8(j) exclusion notices included:
- 51 exclusions based purely on procedural grounds
- 51 exclusions citing Rule 14a-8(i)(7) (ordinary business/micromanagement)
- 34 exclusions citing Rule 14a-8(i)(10) (substantial implementation)
- 17 exclusions citing Rule 14a-8(i)(3) (false/misleading)
Following the SEC staff’s announcement of its no-action policy for the 2026 season, early commentary focused on the potential for proponent litigation in the absence of the SEC staff’s role as arbiter, and the possibility that this risk would drive conservative company approaches to unilateral exclusions under the new policy. Early Rule 14a-8(j) exclusion notices appeared to confirm this expectation, emphasizing procedural and relatively straightforward substantive bases. Beginning in February, however, companies increasingly asserted 14a-8(i)(7) and other more expansive exclusions, suggesting an increase in company confidence. That trend shifted again in late February, when the first of what are now six proponent lawsuits was filed challenging the validity of company exclusions under Rule 14a-8.
Of the six lawsuits filed to date, one covered a human rights and diversity proposal, four covered E&S proposals, and one covered a political spending and lobbying proposal. In five of the six cases, the company relied on the “ordinary business” exclusion under Rule 14a-8(i)(7); the sixth was based on procedural defects.
As of June 2nd, three lawsuits have been settled, with companies agreeing either to implement the proposal or include it in their proxy materials. One case was voluntarily dismissed, and two remain pending. In the pending matters, one company filed its 2026 proxy statement with the proposal included after the court denied the company’s motion to dismiss and granted the proponent’s motion for injunctive relief, while the other filed the proxy without the proposal after the court denied the proponent’s motion for a preliminary injunction.”
Authored by
Broc Romanek