Shareholder rights and governance
One of the tools in our toolkit of active ownership that complements our engagement activities is proxy voting, in which we vote at the shareholder meetings of our investee companies. As with engagement, we use our voting rights to strive to reduce the adverse sustainability impact companies in our portfolios may cause, and to advance sustainability efforts and good corporate practice. Additionally, Storebrand AM has increasingly been involved in filing and co-filing shareholder proposals at investee companies’ Annual General Meetings (”AGMs”) to highlight issues that we believe the company should address. These activities are examples of a functioning shareholder democracy, in which shareholders can make their voices and wishes heard.
Proxy voting can be regarded as the ultimate manifestation of shareholder rights, because it is arguably the most powerful tool that shareholders possess for influencing company strategy, decisions, and policies, as companies are obligated to implement matters that have passed a vote on at shareholder meetings. Proxy voting is also the baseline tool for ensuring accountability, in terms of the board composition, which includes the appointment or re-election of directors. Therefore, regulatory changes or other measures that could have negative effects on this ability, or on any aspect of shareholder rights, are of substantial significance.
As an asset manager that uses its ownership position to influence companies to improve corporate behaviour and reduce adverse sustainability impact, the possibility to engage with companies we invest in and make use of our shareholder rights is not simply a “nice to have”, it is a necessity. For these purposes, a well-functioning shareholder democracy, where shareholders of public companies can utilize their rights to have their say on the management of the company they are invested in, is a bedrock principle.
Recent regression
The last couple of years have seen a regression in shareholder rights, with shareholder democracy on the receiving end of a barrage of measures aimed at sidelining shareholders in favour of corporate leadership. These measures, which could be seen as one manifestation of a larger blowback against ESG and investors that champion ESG issues, are multifaceted. They range from regulatory bodies reversing guidance on previous policies meant to protect these rights, to individual companies relocating from one United States (“U.S.”) state to another in search of more lenient regulation, or the exclusion of shareholder proposals on questionable grounds. The measures vary, so does which party instigates them, but the result is the same; a weakening of shareholders’ influence, with influence being wrestled away from shareholders, particularly smaller investors, in favour of boards of directors and company leadership.
While a lot of the latest developments have taken place in the U.S., it is not the only country where recent regulatory changes have been made to reduce the influence of shareholders on the companies they are invested in. That said, it is the most explicit case currently. The U.S. also counts for a major share of global investment indexes, and a large part of Storebrand AM’s holdings are domiciled there, making these developments especially significant.
Dissecting the latest developments
To better understand this disturbing trend, let's look at some key events that have transpired since the beginning of 2025, portraying certain key developments and examining their adverse effects on shareholder rights. While this timeline will not provide a full picture, it does provide insight into a complex and multifaceted trend which we are continuing to track.
A brief summary of events
- In February 2025, the U.S. Securities and Exchange Commission (“SEC”) issued updated guidance regarding 13(g) and 13(d) filings, with significant implications for investors’ ability to engage with public companies through the targeting of activities that are deemed to be “influencing control of the issuer”. In short, the updated guidance added reporting obligations for investors that have a certain type of engagement with a company they own more than 5% of a class of registered voting securities in. Groups of investors that engage a company on the same issue (knowingly or unknowingly, and without a written agreement of coordination) are also covered by the guidance if their pooled ownership exceeds the 5% threshold.
Analysis:
The change in guidance by the SEC targets activities the SEC deems to “influence control of the issuer”, adding hurdles for large shareholders (or smaller shareholders that are pooled) to engage with investee companies, especially with respect to ESG matters, without being labelled as an “activist” and triggering 13(d) reporting requirements. The interpretation of “influencing control” could be exerting pressure on management to adopt specific changes or signalling consequences if changes are not made. The updated guidance creates hurdles in the sense that it disincentivizes stewardship activities through the threat of heavy paperwork burden (with all that it entails, including both legal-, cost- and compliance-wise) and added scrutiny – which for some investors is undesired or even unrealistic due to various restrictions. The effects of the updated guidance could be a narrowing of coordinated, escalatory shareholder engagement, as to avoid triggering 13D reporting status. The guidance, while in itself is only one single action, underpins a larger and growing trend of scrutiny and restriction of institutional investors’ stewardship practices on ESG.
- In September 2025, new legislation came into effect in the U.S. state of Texas that increased the ownership threshold for investors wanting to file shareholder proposals at certain Texas-based public companies’ shareholder meetings to at least 3% of the shares of the company or shares worth more than $1 million in market value.
Analysis:
These restrictions, which are much stricter than the ones mandated by the SEC, significantly reduce shareholder influence over Texas corporations, undermining shareholder rights by excluding smaller investors from filing shareholder proposals. The measures are widely seen as part of the state’s broader efforts to curb “activist”, or what is sometimes also referred to as “politically motivated”, shareholder activity. Compared to the SEC Rule 14a-8, in which a shareholder must prove a continuous ownership of shares of either more than $25,000 for 1 year, $15,000 for 2 years, or $2,000 for 3 years, the difference is an order of magnitude, with the change seemingly exclusionary in its purpose to give shareholders with control-adjacent exposure the right to raise questions for all shareholders, while limiting smaller shareholders from partaking in setting the agenda.
- Later in September 2025, the SEC issued a statement clarifying its stance on mandatory arbitration provisions, reversing its long-standing policy of blocking companies from going public if they adopt such clauses for shareholder disputes. In simpler terms, the SEC removed its informal, yet de-facto, practice of refusing to accelerate the process for a company that was registering an Initial Public Offering (“IPO”) if it had mandatory arbitration clauses in its charter or bylaws.
Analysis:
Mandatory arbitration provisions can require individual arbitration, rather than court litigation. In practical terms, this opens the door for both IPO candidates and already-public companies to adopt mandatory arbitration provisions, which would require investors to use arbitration instead of lawsuits for federal securities claims and thus disrupt the ability for investors to make claims through class actions. If widely adopted, this could curtail securities class actions, and with it reducing investor protections by closing the avenue of litigation as a complement to voting and engagement.
That said, prior to the SEC clarifying its stance of mandatory arbitration provisions, a company, once public, could have technically inserted a bylaw requiring arbitration of securities claims at any time. That was, however, not common practice, likely due to the SEC’s historic stance on the matter. While the SEC has given a green light to including these provisions, Delaware (where a majority of U.S. corporations are registered) law says you cannot deny access to a courtroom for shareholder litigation. The main takeaway is that the SEC is proposing (and seemingly actively encouraging state legislature to allow for) a way to make it impossible for investors to bring class actions against companies, with the implied assumption being that it will lead to fewer lawsuits against companies overall, since lawsuits are so expensive outside of the class action context. However, the impact is limited so far, as at the moment of this writing, these provisions have hardly been implemented by companies, even with the encouragement of the SEC.
- In an October 2025 keynote, SEC Chairman Paul Atkins deliberated on the necessity for, and whether companies are actually required, to include precatory shareholder proposals in its proxy materials, opening up for changing Rule 14a-8, which governs the shareholder proposal process.
Shortly thereafter, in November 2025, the SEC’s Division of Corporate Finance announced that it would no longer reply to so-called "no-action" requests filed by companies to exclude a shareholder proposal under Rule 14a-8 for the 2025-2026 proxy season. Instead, companies were given free rein to exclude shareholder proposals without needing the SEC’s approval as long as they went through the process of notifying the SEC and the shareholder proposal’s proponents.
Analysis:
The way things have historically worked is that when a shareholder wants to a make proposal to be included on the proxy ballot, it would send the proposal to the company which could either include it or, if it wanted to exclude it, request the SEC to weigh in on the matter. The company would detail its reasoning for why the proposal should be excluded, with which the SEC could either agree or disagree. If the SEC agreed, the company could feel safe that the SEC would not pursue an enforcement action through litigation against the company for excluding the proposal. What could have still happened in this scenario though, is that the shareholders could bring an action against the company for excluding the proposal. This type of shareholder litigation has however not been that common of an occurrence, rather the SEC has had what can be considered a “final say” on the matter of most of these matters historically.
With the new guidance, SEC is essentially choosing not to get involved in this process anymore, no longer weighing in whether a proposal is excludable or not. With that, the threat of the SEC suing a company for excluding a proposal has also in theory vanished, paving the way for companies to freely exclude shareholder proposals.
While the SEC is not going to take any action against the company for excluding a shareholder proposal, there is nothing stopping the shareholder from bringing a lawsuit, which is a development that we have started to see in action this proxy season. Most proposals that have been excluded for this proxy season have been due to the proponent not qualifying (be it thought not having sufficient holdings or other procedural matters) but there have also been instances of companies taking a more aggressive stance with the exclusion of shareholder proposals.
One example of this is the New York Public Pension Funds suing AT&T for unlawfully excluding the Funds’ shareholder proposal ahead of the company’s AGM, citing the decision by AT&T as an “unlawful attack on investor rights at a time of heightened concern over attempts to silence investor voices”. The shareholder proposal asks the company to do what its peers Verizon and T-Mobile already do in terms of publicly disclosing their EEO-1 Report, which is a report on the diversity of its workforce. Less than a week after the lawsuit was filed, AT&T settled and agreed to include the proposal on the ballot. Another example is PepsiCo being sued by PETA for excluding its shareholder proposal requesting a report about the treatment of animals in its supply chains. Less than a day after the lawsuit had been filed the company reversed course and agreed to include the proposal at its AGM.
Based on the data we have so far, the current trend seems to be that most companies continue to include shareholder proposals on the proxy ballot. While I cannot speak with certainty to the motives behind this, one motive could be that the companies simply do not want to get into legal battles over these proposals, choosing instead to settle and include the proposal rather than taking on the expense of defending the lawsuit if the shareholder has gone through the steps to litigate the matter. However, the effect that this guidance has had in conjunction with all the other measures implemented to stimy shareholder proposals is mostly felt in the number of overall shareholder proposals which thus far is down this year from previous years. Additionally, for the investors that do not have litigation as a realistic option, the avenue for contesting a company wrongfully excluding their proposal is very limited following the new guidance. As with a lot of the measures implemented that have had a negative effect on shareholder rights, smaller investors with more limited resources have been affected more drastically than their larger counterparts.
Another interesting development regarding this particular policy shift by the SEC is the legal challenge filed against it by a pair of investor representative groups in late March 2026. The lawsuit seeks to stop the implementation of the new policy, which it sees as giving companies a rubber-stamp to stop investors from presenting and voting on proposals regarding issues directly relevant to a company’s long-term performance and risk profile. As of the moment of writing, no rule has actually been changed, and no change has been proposed by the SEC. Rather this is a policy shift, with the SEC deciding to implement a hands-off approach to shareholder proposals. The lawsuit argues that the SEC changed how Rule 14a-8 operates through “informal staff practice rather than through rulemaking”, deciding to not go through the proper channels that are required by an agency to adopt or effectively alter binding regulatory standards (as per the Administrative Procedure Act). As of the time writing this, the lawsuit was still pending in the U.S. District Court of the District of Columbia. I will not attempt to predict what the outcome will be but from an outsider’s perspective the lawsuit seems to have merit since Rule 14a-8 has seemingly been tangibly changed quite drastically.
- In December 2025, the U.S White House issued an Executive Order (“EO”) targeting the two largest Proxy Voting Advisors, ISS and Glass Lewis. Although the EO did not change any laws or rules, it did task several U.S. agencies to investigate the companies for advancing what the White House called “political agendas”, by which it referred to “diversity, equity and inclusion and environmental, social, and governance”, over financial return. Additionally, the Federal Trade Commission, in consultation with the Attorney General, was tasked with assessing whether Proxy Voting Advisors enable investors to coordinate their voting in a colluding manner that is not consistent with fiduciary duties.
Analysis:
The EO targets Proxy Voting Advisors, which are firms that provide research, analysis, and recommendations to institutional investors on how to vote their shares at shareholder meetings. The output these firms provide is a valuable tool that contributes to the overall work of voting proxies, especially when an investor chooses a customized or tailored solution where the recommendations align with the investor’s own policies and voting wishes.
While the legality or enforceability of this order remains unclear, it provides insight into the overall agenda of the highest decision makers and which line they want to take. As noted, this approach does not see ESG and diversity, equity and inclusion (“DEI”) as factors that should be considered in investment decisions and proxy voting, characterizing them as “political agendas”. What the fallout from this EO will be remains to be seen, but the greater scrutiny into proxy voting advisors and their voting recommendations could have negative effects on shareholder democracy if the research or recommendations they can provide to clients become restricted, watered-down, or tampered with in any way. While investors have a final say on how they vote, the services provided by Proxy Voting Advisors are after all a helpful resource that complements this process.
- In January 2026, the SEC updated its policy regarding voluntary submissions of Exempt Solicitations, which is a type of filing that, among other things, allows shareholders to promote their shareholder proposal before a company’s shareholder meeting. The updated policy bars any shareholder that does not own over $5 million of shares to file a Notice of Exempt Solicitation using the SEC’s public filing system EDGAR.
Analysis:
Any attempt to persuade shareholders on how to vote a proxy can be considered proxy solicitation. These types of activities have historically been tied to a heavy paperwork burden for anyone participating in them. However, exemptions were implemented for parties that simply want to voice their arguments for voting one way or another on items that shareholders are already slated to be voting on, while not seeking broader proxy authority to vote others’ ballots at a meeting. The rule required that investors with holdings worth more than $5 million in a company and are distributing non-public material for that type of proxy solicitation needed to file it publicly with the SEC so that all shareholders could see it on the EDGAR platform.
The January 2026 change is explainable against the backdrop that smaller investors, with less than $5 million in holdings, began using the EDGAR filing system to voluntarily file their solicitation materials, even though they were not mandated to do so. This was an efficient way of distributing these materials to other shareholder since it made them visible for all shareholders on the EDGAR platform. The SEC seemingly decided that this was an abuse of the rule, deciding to no longer accept voluntary solicitation filings going forward.
The change has an extra chilling effect on ESG-focused filers, most of which do not often hold over $5 million of shares in a company. An important factor to consider is also that this change is being made against the backdrop that the largest passive investors, who usually make up the largest owners of publicly traded companies, do not have a habit of participating in this type of solicitation. As such, the shareholders that most often wish to promote shareholder proposals or other voting items through the EDGAR platform are now being restricted, with the possible reach of their outreach being substantially more limited than before.
- In a January 2026 speech, Brian Daily, the Director of the Division of Investment Management of the SEC, suggested that proxy voting itself may not be a fiduciary duty for all investment advisers, implying that especially investment advisers of passive and systematic strategies, such as index funds, should not be voting proxies at all.
Analysis:
“The implied suggestions made in the speech were not necessarily stated as direct expectations by the SEC to be fulfilled by investor advisers. However, following the overall regulatory developments that have taken place since the beginning of 2025, the suggestion that voting proxies may not be necessary can be interpreted as yet another action aimed at pacifying investors to the benefit of company boards. While the suggestion must be implemented by investment advisers to actually yield the effect of decreased investor influence through a lower voting turnout, it can be argued that the SEC has implicitly made their preferences known to the investor community.
Shareholder rights remain central to the debate on modern corporate governance. Illustration photo: Element5 Digital on Unsplash
Non-US and company developments
While we have seen many of the developments related to a weakening of shareholder democracy take place in the U.S., it is not singular in this recent trend (although it is the most explicit case). From an international perspective, one particular example comes to mind:
In March 2026 in Japan, lawmakers discussed making changes to the country’s “Companies Act”, which could severely hamper shareholders’ ability to file shareholder proposals. To be able to file a resolution at a shareholder meeting for a Japanese company, a shareholder needs to either have held at least 1% of the total voting rights or 300 voting rights (which equate to 30,000 shares) for the preceding six months. The change that is now being discussed would remove the 300 voting rights criteria, leaving only the 1% criteria in place. The impact this change would have on shareholders’ ability to file resolutions cannot be overstated, since very few investors actually hold over 1% of shares, especially at the largest Japanese companies. For example, take a company like Toyota Motor Corporation, at whose 2023 AGM Storebrand AM co-filed a resolution focused on climate-related lobbying. The company has 15,794.987,460 shares issued. To hold 1% of the company, an investor would thus need to own 157,949,875 shares. As of the moment of writing this article, that would signify a position worth approximately $3.3 billion. On the other hand, 300 voting rights (30,000 shares) equates to a holding of only $628,500 in comparison. Such a change would, evidently, have a massive impact on who would be able to file at Japanese AGMs going forward, severely restricting shareholder democracy.
It is, however, not only regulators or lawmakers that are contributing to recent shareholder rights erosion. Certain companies, likely feeling emboldened by recent developments, are themselves taking measures to decrease shareholder influence. Companies attempting to exclude shareholder resolutions aside, there are other measures that certain companies are implementing. Some companies are redistricting from one U.S. State to another (with Texas being the prime example) in search of more lenient, management-friendly regulatory environment with (among other) higher proposal thresholds. Another specific example is Exxon Mobil’s Retail Voting Program, which retail shareholders can sign up for to allow the company to vote their shares in line with the board’s recommendations at all future shareholder meetings. While the program does not remove voting rights, it reconfigures default governance power in ways that materially weaken shareholder democracy in practice since it converts a generally passive portion of the shareholder base into a management-aligned voting bloc. This, in turn, entrenches incumbent power by design, adding yet another hurdle for other shareholders to make their voices heard.
Takeaways
What emerges from the examples I have noted is not the collapse of shareholder democracy. Rather, they are subtle shifts taking place through multiple fronts at once. Voting rights remain formally intact, meetings are still held, and shareholder proposals still circulate. Yet across certain jurisdictions and companies, shareholder rights are being infringed on through new defaults, thresholds, and procedures, pacifying the overall shareholder voice. When taken to its extreme, the result is a system that retains the essence of ownership while hollowing out its substance, limiting shareholders to quiet participation instead of being able to actively exercise the rights that come with ownership. In this scenario, shareholder democracy exists but only insofar as it is orderly, deferential, and ultimately predictable.
That extreme scenario need not be the case, however. First, despite everything that is going on, shareholder democracy has still not lost its relevance, which is evident by the pushback these measures have been met with by the investor community and the lack of broad adoption by individual companies in implementing the new tools they now have at their disposal. Secondly, and important to emphasize again, is that the SEC has not been acting through actual rulemaking as of yet, but rather through changes in policies, guidance, and interpretations of rules. Third and finally, while the regulatory sentiment du jour is what it currently is, that sentiment will likely not be permanent if history is to be judged, even if change can be slow to take form. Take Rule 14a-8 for example. It was introduced in 1942 to counter what was described as a democratic failure of proxy voting (based on the conclusion that company proxy materials would be materially misleading if they omitted shareholder proposals of which management had notice). Since then, it has been narrowed, expanded and re-interpreted repeatedly, across administrations and political cycles.
At Storebrand AM, we will 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 that companies that are well-positioned to deliver on sustainability opportunities and that manage underlying sustainability risks, such as those associated with environmental, social, and governance matters, will be more robust and better positioned to help us deliver the best risk-adjusted long-term financial returns for our clients in a responsible manner. Our stewardship activities will continue to display this belief, even in this changing shareholder democracy environment.