On October 9, 2025, Chairman Paul S. Atkins of the U.S. Securities and Exchange Commission (SEC) gave a much-publicized keynote address at the University of Delaware’s John L. Weinberg Center for Corporate Governance.1 In the speech, Chairman Atkins generally expressed concern over the costs and difficulties facing public companies in the U.S. and identified several possible areas of reform, including with respect to practices surrounding shareholder proposals at shareholder meetings and the current shareholder litigation environment. These remarks follow a Policy Statement issued by the SEC on September 17, 2025, signaling that the use of mandatory arbitration provisions in a company’s governing documents to address shareholder litigation would not impact the SEC’s decisions to declare registration statements effective.2 Public companies, and those companies considering going public, will want to monitor these developments closely.
Shareholder Proposals
Chairman Atkins expressed a desire to “de-politicize shareholder meetings and return their focus to voting on director elections and significant corporate matters.” As part of this, Chairman Atkins identified non-binding (also known as “precatory”) shareholder proposals submitted under Rule 14a-8 of the Securities Exchange Act of 1934 (Rule 14a-8) as an area of interest for the SEC. He emphasized his view that precatory proposals—which typically focus on a company’s approach to environmental, social, and governance issues and the results of which are not binding on the company—are time-consuming and expensive for a company and often pertain to matters immaterial to the company’s business. He noted that Rule 14a-8 may only be used as a mechanism for including a shareholder proposal in a company’s proxy statement if state law permits a proposal to be brought before a shareholder meeting, and that the rule expressly provides that a company can exclude a shareholder proposal if it is not a proper subject for shareholder action under state law.3 He went on to suggest that, at least with respect to Delaware corporations, precatory proposals may not be a proper subject for shareholder action if, as some argue, shareholders do not have a fundamental right under Delaware law to propose or vote on them.
Chairman Atkins ultimately indicated that, based on the above principles, 1) a company could seek no-action relief from the SEC staff to exclude a precatory shareholder proposal through the usual Rule 14a-8 process and 2) if a company obtained a supporting legal opinion from counsel that a precatory proposal was not a proper subject for shareholder action under state law, he had “high confidence” that the SEC staff would honor that position.
The path suggested by Chairman Atkins is catching attention, although it is important to be aware of legal complexities associated with it. The state law issues raised by Chairman Atkins will require analysis, including based on the nature of a given shareholder proposal and the company’s jurisdiction of incorporation. Companies acting as first movers in this context may face litigation by shareholders over the relevant state law and federal law issues. It is also possible that the SEC, at least with respect to Delaware corporations, would seek guidance from the Delaware Supreme Court on the relevant Delaware law points using a mechanism by which Delaware law provides for the SEC to certify questions to the Delaware Supreme Court.4
Apart from highlighting a path by which companies may seek to exclude precatory shareholder proposals, Chairman Atkins made clear that the SEC is reassessing Rule 14a-8 as part of its rulemaking agenda. He indicated that he asked the staff to evaluate whether the SEC’s original rationale in adopting the rule in 1942 still applies today, which could suggest that the SEC may propose significant changes in this area.
Shareholder Litigation Environment
Chairman Atkins also raised concerns regarding “meritless, vexatious, or frivolous litigation” that “also has the marginal effect of driving capital away from the U.S. public markets.” He suggested two potential tools for addressing such concerns, either or both of which would be set forth in a company’s governing documents to address shareholder claims: 1) mandatory arbitration provisions, and 2) fee-shifting provisions.
A company’s potential adoption of a mandatory arbitration provision for shareholder claims raises various legal issues. For one, governing documents are generally creatures of the law of the state of incorporation. Arbitration provisions of the type identified by Chairman Atkins currently are not permitted under Delaware law and may not be permitted under other states’ laws; this raises questions about enforceability of these provisions under state law and whether federal law does or could preempt state law. In addition, as the SEC’s Policy Statement discussed, there are questions to assess as to whether arbitration provisions comport with federal securities law. Given the legal considerations involved, companies that are early adopters of such provisions would need to be willing to contend with litigation.
The second tool discussed by Chairman Atkins is fee-shifting provisions in charters or bylaws—that is, “loser-pays” provisions that would shift costs to a plaintiff shareholder if the company prevails in litigation. Again, such a concept raises state law issues. After the Delaware Supreme Court upheld a fee-shifting provision in 2014, controversy ensued and Delaware ultimately amended its statute to prohibit such provisions in 2015.5 Again, other states may or may not permit such provisions.
Conclusions
Chairman Atkins’s speech, along with the SEC’s Policy Statement on arbitration provisions a few weeks prior, is spurring discussion about corporate governance and the appropriate policies for smoothing access to U.S. capital markets. These developments also dovetail with, and will likely contribute to, the ongoing debate about the right direction for state corporate law and related shareholder litigation trends. They may also presage significant changes in rules by the SEC. Many companies will want to follow these developments and the ongoing conversation, while being mindful of the legal complexities associated with some of the proposed solutions.
[1]Speech available at https://www.sec.gov/newsroom/speeches-statements/atkins-10092025-keynote-address-john-l-weinberg-center-corporate-governances-25th-anniversary-gala.
[2] Our prior alert on the Policy Statement is available here: https://www.wsgr.com/en/insights/sec-issues-policy-statement-clarifying-view-on-mandatory-arbitration-provisions.html.
[3]See Rule 14a-8(i)(1).
[4] For example, in CA, Inc. v. AFSCME Employees Pension Plan, C.A. No. 329, 2008 (Del. July 17, 2008), the SEC certified two questions regarding corporate bylaws to the Delaware Supreme Court.
[5] In ATP Tour, Inc. v. Deutscher Tennis Bund, 91 A.3d 554 (Del. 2014), the Delaware Supreme Court found that fee-shifting provisions in the bylaws of a Delaware corporation were facially valid under Delaware law, but in 2015, Delaware enacted legislation that broadly prohibited traditional stock corporations from adopting such provisions.
