Evaluating Joe Grundfest's Argument For Repealing the Shareholder Proposal Rule

Grundfest wants to end Rule 14a-8 not mend it

The shareholder proposal rule (SEC Rule 14a-8) seems to be squarely in SEC Chairman Paul Atkin’s sights. As such, it has been a frequent subject of our conversations here at BainbridgeOnCorporations, including commentary on how Atkins might go about fixing the serious flaws in the rule.

SEC Chair Paul Atkins Continues His Focus on Reforming SEC Rule 14a-8 (the Shareholder Proposal Rule): Part I

SEC Chair Paul Atkins Continues His Focus on Reforming SEC Rule 14a-8 (The Shareholder Proposal Rule): Part II

I have argued “that Rule 14a-8 should be repealed entirely or, at a minimum, reformed to align with its original purpose while restoring balance to corporate governance.”

Rule 14a-8 has outlived its usefulness. Its costs, procedural inefficiencies, and susceptibility to misuse outweigh its benefits, particularly in a modern corporate governance environment where other tools for shareholder engagement exist. Repealing the rule would restore balance to corporate governance, empowering boards to focus on their fiduciary responsibilities and long-term value creation. If repeal proves politically unfeasible, meaningful reforms—such as higher ownership thresholds, stricter materiality standards, and revitalized exclusions—must be implemented to align the rule with its intended purpose.

So I was very interested to see Joseph Grundfest’s Wall Street Journal op-ed, End the SEC’s Access Rule, Don’t Mend It: Activists love it, but it is counterproductive, has no basis in statute, and could be unconstitutional.