This case was brought in the 5th Circuit by activist group NCPPR accusing the SEC of applying its Rule 14a-8 in an inconsistent and politically motivated manner. Under SEC Rule 14a-8, public companies are required to include certain shareholder proposals on their proxy ballot. Historically, companies could exclude proposals that encroached on the company’s "ordinary business operations." However, in November 2021, the SEC released new guidance (SLB 14L) making proposals that raise issues with "broad societal impact" presumptively non-excludable. And activist groups from across the ideological spectrum are increasingly using shareholder proposals to inject contentious ideological policy fights into corporate governance. In May 2023, we intervened in this case to push back on this troubling trend.
On July 21, 2023, we filed our opening brief arguing that Rule 14a-8 violates the First Amendment by compelling a company to include shareholder-selected proposals unrelated to the company’s core business or the creation of shareholder value on the company’s own proxy statement at the company's own expense. Aside from these constitutional concerns, the SEC lacked authority to issue Rule 14a-8. Congress only authorized the SEC to enact rules prohibiting deceptive or misleading statements by corporations when they solicit shareholder-proxy votes. Rule 14a-8, however, does not address such statements.
On October 3, 2023, we filed our reply brief urging the 5th Circuit to reject the SEC's jurisdictional and procedural arguments and hear this important challenge to the SEC's authority to dictate which proxy ballot items investors should consider. We explain in our reply brief that, contrary to the SEC's assertions, there are no jurisdictional or procedural barriers preventing the 5th Circuit from holding that the SEC lacks authority to compel companies to include and subsidize shareholder speech within the company's own proxy statement. And in addition to the SEC's failure to clear the First Amendment barrier to its compelled subsidized speech regime, the SEC fails to identify a clear statement from Congress giving it the authority to hijack a corporation's own speech in contravention of state corporation law that does not enable shareholders to insert their speech or voting proposals onto a corporation's own proxy statement.