Ownership without influence?

When I last wrote about shareholder democracy in April 2026, in a previous article “Shareholder democracy: constrained, contested, but not concluded”, the core observation was that shareholder rights were not being removed outright, but rather suppressed gradually. These rights were being weakened through a series of incremental, sometimes interconnected, changes that made it more difficult for investors to effectively exercise the rights that come with their ownership, primarily concerning their U.S. holdings. But what happens when those changes stop being incremental and start shifting into higher gear? 

Back at that point, just a few months ago, the shift in shareholder democracy was manifesting through regulatory reinterpretations, new legislation, restrictions on investor stewardship activities, and a retreat by regulators from their traditional role as arbiters. With each additional measure, influence shifting more and more toward company management at the expense of shareholders.

Now, things are moving into a higher gear, with new developments that have solidified the overall direction: where previous measures largely affected how shareholder rights could be exercised, recent proposals now increasingly call into question whether certain shareholder rights should exist in their current form at all. If the developments outlined in my previous article represented an erosion of shareholder democracy, the latest phase increasingly resembles an attempt to reshape it entirely.

"... If the developments outlined in my previous article represented an erosion of shareholder democracy, the latest phase increasingly resembles an attempt to reshape it entirely..."

SEC shifting from neutral stance

When discussing developments in the United States, much of the recent attention has focused on the Securities and Exchange Commission's ("SEC") role in the shareholder proposal process. Historically, the SEC had functioned as an informal referee when companies sought to exclude shareholder proposals from proxy ballots. While imperfect, this process provided investors with an independent body that could assess whether a proposal was properly excludable under Rule 14a-8 of the US Code of Federal Regulations.

The SEC's decision last year to largely stop responding to no-action requests was therefore significant. The concern was not necessarily that every company would immediately begin excluding proposals. Rather, it was that the process would become less predictable and less accessible, particularly for shareholders with limited legal and financial resources to realistically be able to challenge a company that excludes their proposal. A right that was previously protected by a relatively accessible administrative process has now become materially inaccessible to a large portion of shareholders, practically allowing shareholder rights for those with sufficient resources to defend them. 

Since then, the SEC has moved even further away from its traditional role.

Proposed changes threaten shareholder rights

Perhaps the most consequential development since my previous article is the changes that are now threatening Rule 14a-8 itself.

For more than eighty years, Rule 14a-8 has served as the principal mechanism through which shareholders can place proposals before fellow shareholders without having to conduct a separate proxy solicitation campaign. Instead, the rule has allowed these shareholders to have their proposals included in the materials prepared and distributed by the company itself. However, recent regulatory developments have moved toward a more fundamental question: should such a federal framework exist at all?

In September 2026, the SEC proposed rescinding Rule 14a-8 in its entirety. The proposal argues that the rule exceeds the SEC's statutory authority and that decisions concerning shareholder proposals should instead be governed by state law and company governing documents. If adopted, the proposal would remove the federal mechanism that has enabled qualifying shareholders to place proposals in company proxy materials since the 1940s.

In essence, if the rule change were to pass, the generally consistent federal Rule 14a-8 framework would be replaced with a fragmented system in which shareholder rights would be more heavily reliant on which jurisdiction an investee company chooses to incorporate and the governance structures that management chooses to adopt.

With Storebrand AM's holdings containing approximately 650 companies incorporated in the U.S., all of these proposed changes would have a tangible effect on us as shareholders. The risk is that the rights of shareholders begin diverging dramatically across companies, with access increasingly determined by legal technicalities and incorporation choices rather than ownership itself.

A race to the bottom on accountability

This shift is particularly significant against the backdrop of developments in states such as Texas. In my previous article, I discussed how the U.S. state of Texas had introduced substantially higher thresholds for shareholders seeking to submit proposals at certain companies. Today, they appear considerably more consequential. If federal protections continue to weaken, or if authority increasingly shifts back to the states, the attractiveness of management-friendly jurisdictions may increase substantially. 

This has implications far beyond where a company is legally domiciled. Corporate law has always involved a degree of regulatory competition between jurisdictions. However, from a shareholder rights perspective, there is a meaningful difference between competition designed to improve efficiency and competition designed to reduce accountability. The concern is that shareholder rights become another factor in a race where the same rights are gradually negotiated downward as companies get more incentivized to relocate toward jurisdictions that offer management greater insulation from shareholder oversight.

As shareholders of public companies, there is an expectation of which rights we have at our disposal and can utilize. Quiet participation, in which we invest and then have no means to influence the investee company, is not an investment strategy that is in the best interest of our clients. Instead, we use our shareholder rights to keep boards accountable to shareholders. 

When access to those rights becomes more restricted, more costly, more complicated, or more uncertain, no one wins. While the effect would not be distributed entirely evenly across market participants, as large and well-resourced investors may still find ways to navigate the system, the overall level of rights has still diminished. 

While we continue to oppose regulatory moves aimed at sidelining investors, we now also place larger expectations on our investee companies to not follow the path that is being staked out for them and not backing away from their responsibilities to shareholders.

"... these rights are not simply nice-to-haves; they can have material importance that affects the value of our investments..."

Material impact of shareholder rights 

At Storebrand AM, we work with the best interests of our customers in mind. Being able to ensure the investor perspective is being heard is key in that process. We also believe that strong shareholder protections go hand-in-hand with well-functioning corporations that create positive returns for their shareholders. 

Studies have suggested a connection between stronger shareholder rights and increased performance and valuation1 , a connection between management insulation from shareholders and entrenchment with lower valuations2, as well as corporations in jurisdictions with stronger legal protections for minority shareholders tending to attract a stronger valuation.3 The point here is these rights are not simply nice-to-haves; they can have material importance that affects the value of our investments.

What remains to be seen

While the latest developments paint a bleak picture, it is worth noting a couple of things: Firstly, no formal change has yet to take place. The proposed rule change is currently under review with a comment period currently taking place. Secondly, it would be premature to conclude that shareholder democracy is in decline beyond recovery. History suggests that governance frameworks rarely move in a single direction forever. Corporate governance has repeatedly experienced periods of expansion and contraction in shareholder rights. Thirdly, while the tools that shareholders rely on are being degraded, the tools granted to companies have yet to be broadly implemented. 

When talking about shareholder rights, the discussion has moved from specific tools shareholders possess, to the role that shareholders should play in corporate governance altogether. Active ownership is predicated on a simple principle: ownership should confer meaningful rights and meaningful influence. The question that we are now confronting is whether shareholder democracy will continue to be viewed as a mechanism for accountability, or whether it will gradually be redefined as a largely symbolic feature of ownership. 

While the answer remains unsettled, we at Storebrand AM continue to use our shareholder rights in the best interests of our clients, while carefully tracking any developments in this space. We remain undeterred in our belief and our stewardship activities will continue to display this belief, even in this changing shareholder democracy environment. Whether this belief needs to be displayed in another way, from now onward, isn't clear yet, but what doesn't change is the ambition powering it. 

+ Read the SEC's announcement and fact sheet on this issue and learn more about our views on corporate governance in our recent Sustainable Investment Review.