Shareholders Surprised By Company Engagement Post-SEC Flight (1)

Shareholders entered the year expecting the cold shoulder from companies after the SEC’s retreat from proposal oversight, but have been pleasantly surprised by higher than expected engagement from corporations looking to avoid lawsuits and reputational damage.

ISS-Corporate’s recent analysis found companies are putting more than 70% of investor proposals to a vote at annual meetings so far this year, up from 59% for the 2025 season overall. On top of that, several investor groups say they’ve reached more behind-the-scenes agreements with companies on policy initiatives ahead of those meetings than in previous years. Others say companies are scheduling more meetings and approaching conversations with increased willingness to work things out.

The reported fidelity to shareholder engagement signals many corporations aren’t cashing in on an increasingly deregulated environment, even if attitudes vary company-to-company.

“I was surprised at how conservative some companies were. I think companies could have excluded more proposals,” said Ronald Mueller, partner at Gibson Dunn who advises companies. “Our approach on advising was really just stay the course. Look at the precedent, look at the rules, look at the significance or lack of significance.”

The Securities and Exchange Commission rattled shareholders in November by putting the fate of written shareholder proposals largely in companies’ hands. The move marked a sea-change, as the agency had for decades issued guidance on which proposals had to see a vote at annual meetings and which ones could be excluded.

“We had no idea what to expect,” said Laura Krausa, corporate advocacy director for health system CommonSpirit Health’s shareholder arm. “I honestly feel like it’s been one of the more successful shareholder seasons that we’ve had.”

More Agreements, Fewer Exclusions

Companies have issued fewer exclusion notices thus far during this proxy season because they’re being more conservative and proponents seem to be withdrawing more resolutions and not submitting as many to begin with, said Michael Mencher, special counsel at Cooley LLP. Withdrawals often happen when companies accommodate shareholders or shareholders scale back their initiatives to avoid the bad optics of low ballot support, he said.

Shareholder proponent James McRitchie said he has withdrawn roughly half of his proposals so far after reaching agreements with companies, such as Marriott International Inc. He withdrew about 40% last year and about 20% in previous years, he said. McRitchie said he thinks companies are “more eager to reach an agreement” this year.

“They don’t want to have proposals on the ballot, but they don’t want to use the fake process either,” he said, referring to the SEC’s new policy.

Prior to November, companies would notify the SEC of their intent to exclude a shareholder proposal, and agency staff would send a letter either approving or denying the decision based on the company’s argument. Under the new guidelines, companies still have to alert the SEC if they exclude proposals, but the agency isn’t weighing in on the merits of their arguments as it signs off.

Even with the agency largely on the sidelines, companies are still facing liability. The shareholder proposal process is ultimately governed by federal regulation, not just internal SEC staff guidance, so investors can—and do—sue if they feel a proposal has been improperly excluded. The first two months of the year have already seen five lawsuits, two of which have ended with companies agreeing to include the proposals in question.

Other risks for companies include vote-no campaigns against board governance committee chairs, negative voting recommendations from proxy advisory firms, and reputational fallout.

In short, both companies and shareholders are navigating new terrain with unknown consequences, which has compelled them to work together, said Danielle Fugere, president and chief counsel at progressive shareholder group As You Sow.

Sometimes what investors want already aligns with corporations’ existing strategies. Paul Chesser, who leads think tank National Legal and Policy Center’s corporate engagement arm, has this year reached agreements with large-cap companies like Goldman Sachs Group Inc., Deere & Co., and American Express Co. to drop diversity criteria from the board director selection process. Concessions like these are politically favorable after President Donald Trump’s 2025 executive order that put a target on diversity, equity, and inclusion in the private sector.

Environmental and social proposals can be negotiable if companies have related initiatives in the works, Mencher said.

Closed Doors Persist

Companies and shareholders can have a more difficult time reaching agreements on other proposals. For instance, governance proposals, which are gaining steam and ask for things like independent board chairs, are more black-and-white and harder to negotiate on, said longtime shareholder proponent John Chevedden.

And not every company is willing to negotiate or send proposals to a vote. Starbucks investors, for instance, said in a Feb. 18 letter that they were having trouble getting meetings with the company’s board directors.

Chevedden said he has seen an uptick in meetings and some successful agreements on political spending disclosures with companies like F5 Inc. and Floor & Decor Holdings Inc. But others are excluding similar resolutions, which typically made the ballot in past years, he said.

Sanford Lewis, director and general counsel of Shareholder Rights Group, said he’s surprised how many proposal exclusions have been on “ordinary business” grounds, in which a company argues that shareholders want control over day-to-day matters.

Some proposals were written explicitly with previous SEC opinions in mind but were still excluded, he said.

Pia de Solenni, vice president of corporate engagement for shareholder group IWP Capital LLC, said that while she’s seen less company pushback overall this year as she engages with them on charitable giving practices, some are more hostile.

“It’s all over the place,” she said. “It’s such a wild west right now.”