On October 9, SEC Chairman Paul Atkins delivered the keynote address at the John L. Weinberg Center for Corporate Governance’s 25th Anniversary Gala, providing details about what he calls his project to “make initial public offerings great again.”
Atkins pointed out that there are now only about 4,700 companies whose shares are listed on U.S. exchanges, compared with about 7,800 just 28 years ago. Atkins described his project to reverse this trend as having three “pillars”:
- Pillar 1 — simplifying and “scaling” the SEC’s disclosure requirements to reduce public companies’ costs of complying with them, while at the same time making them more comprehensible.
- Pillar 2 — "de-politicizing” companies’ shareholder meetings and returning their focus to the election of directors and voting on “significant corporate matters”; and
- Pillar 3 — reducing frivolous securities lawsuits, while maintaining an avenue for shareholders to bring meritorious claims.
Atkins’ project has considerable potential to further the objectives of President Trump’s executive orders that seek to promote capital formation and economic prosperity via more rigorous analyses of (a) whether the benefits of federal regulations and enforcement activities outweigh the costs and (b) whether each such regulation or activity is within the properly understood legal mandate of the federal regulatory agency in question. Such orders include Executive Order 14192, titled “Unleashing Prosperity Through Deregulation,” and Executive Order 14219, titled “Ensuring Lawful Governance and Implementing the President’s ‘Department of Government Efficiency’ Deregulatory Initiative.”
In his Weinberg Center address, however, Atkins focused only on certain components of Pillars 2 and 3.
Precatory Shareholder Proposals
As to Pillar 2 (depoliticizing shareholder meetings), Atkins focused mainly on so-called precatory shareholder proposals. These are shareholder proposals that make a suggestion or recommendation, often relating to environmental or social issues that, even if approved by shareholders, would not have any binding effect on the company or its board.
Atkins recounted that it has always been the SEC’s position that state corporate law determines whether precatory proposals are proper subjects for a vote at a shareholder meeting. He pointed out, however, that the text of the SEC’s proxy rules has long reflected the SEC staff’s approach of presuming that a proposal is proper under state law, unless the company demonstrates otherwise.
This presumption has discouraged companies from arguing to the staff that a precatory shareholder proposal is improper under state law. Atkins indicated, however, that some Delaware lawyers may believe that, because Delaware law does not affirmatively give shareholders the right to present precatory proposals for a shareholder vote, a Delaware corporation can prohibit such votes.
So, Atkins’ address summed up as follows:
[I]f there is no fundamental right under Delaware law for a company’s shareholders to vote on precatory proposals — and the company has not created that right through its governing documents — then one could make an argument that a precatory shareholder proposal submitted to a Delaware company is excludable [from the company’s proxy statement as being improper under state law]. If a company makes this argument and seeks the SEC staff’s views, and the company obtains an opinion of counsel that the proposal is not a “proper subject” for shareholder action under Delaware law, this argument should prevail, at least for that company. I have high confidence that the SEC staff will honor this position.
Accordingly, this appears to open a major previously unexplored avenue for public companies to possibly exclude precatory proposals from their proxy materials.
Enhanced Share Ownership Prerequisites
Atkins also suggested another way in which a company might reduce the number of unwanted shareholder proposals.
The SEC’s proxy rules specify relatively low amounts of company shares that a shareholder is required to own as a prerequisite to being entitled to include a proposal in a company’s proxy statement. Atkins, however, referred to the fact that, in September of this year, Texas amended its Business Organizations Code to allow a Texas corporation to elect to be governed by a new code provision that sets much higher stock ownership thresholds for this purpose. He also noted that the articles of incorporation or other governing documents of companies may include similar preconditions for submission of shareholder proposals that exceed the preconditions prescribed by the SEC’s proxy rules.
Concerning such enhanced preconditions, Atkins concluded as follows:
[I]f a company has opted into the [enhanced preconditions in the] Texas law, or has otherwise properly established [pre]conditions in its governing documents, and receives a shareholder proposal from a proponent that does not satisfy the requirements in the Texas law or the governing documents, then the proposal should be excludable [from the company’s proxy statement as being improper under state law].
Atkins cited some history that supports this conclusion, as well as previous statements by his fellow Republican Commissioner Mark Uyeda, to the same effect. So, establishing higher share ownership prerequisites may now be another viable means of limiting the number of shareholder proposals.
Litigation Reform
Turning to Pillar 3 of his project (the litigation reform pillar), Atkins referred to a September 17, 2025, SEC policy statement titled “Acceleration of Effectiveness of Registration Statements of Issuers With Certain Mandatory Arbitration Provisions.” By reversing the SEC staff’s long-standing refusal to grant accelerated effectiveness to such registration statements, this policy statement makes it more feasible for companies registering their offerings with the SEC to have provisions in their governing documents that require their shareholders to arbitrate any securities law claims they may have against the company. Such mandatory arbitration provisions can reduce the incidence and cost of resolving frivolous claims, particularly claims in the form of class actions.
On the other hand, this year’s amendments to the Delaware General Corporation Law have the effect of prohibiting Delaware corporations from mandating that shareholders arbitrate.
Furthermore, this year’s amendments also expanded Delaware’s prohibition against “fee-shifting” provisions that Delaware corporations might want to include in their organizing documents. Such fee-shifting provisions require shareholders who sue a corporation to bear the corporation’s legal fees and expenses if the shareholders lose their case. Although Delaware previously had permitted such fee-shifting for certain types of claims by shareholders, under this year’s amendments, Delaware prohibits fee-shifting in any shareholder action (including actions under the federal securities laws).
To the extent that both mandatory arbitration provisions and fee-shifting arrangements may help companies avoid or minimize the costs of frivolous litigation, this year’s amendment to the Delaware law on those subjects runs counter to the purposes of Atkins’ Pillar 3.
Atkins Weighs in on Delaware Law
Atkins’ address criticized this year’s Delaware law amendments as depriving Delaware corporations of the potential benefits of both mandatory arbitration and fee-shifting. He expressed hope that the Delaware legislature will see the wisdom of reversing its positions on both mandatory arbitration and fee shifting.
Nevertheless, Atkins praised Delaware for having amended its Constitution in 2007 to give the SEC the ability to certify questions to Delaware’s highest court for declaratory judgments. According to Atkins, the SEC received a very prompt response in 2008 to the one question it has so far submitted for declaratory judgment.
To the extent that the SEC’s agenda (including Atkins’ “make IPOs great again” project) is now or in the future impacted by questions of Delaware law, such declaratory judgments may be of considerable assistance to the SEC. Atkins expressed the hope that the Delaware court would continue to cooperate in responding to SEC requests. It seems likely that Delaware questions will increasingly arise, because, under Trump/Atkins priorities, the SEC seems more inclined than it has historically been to defer to state law in certain areas (including in the ways mentioned in Atkins’ address).
Atkins made clear that he had selected the Weinberg Center event as the venue for his remarks, because his audience there would include many persons who can influence how state corporate law develops and is applied. Atkins, therefore, intended not only to provide insights into his objectives for the SEC but also to subtly influence the application and development of state law in ways that may further those objectives.
