Trump’s SEC Gives Companies More Control Over Shareholder Votes – Lawsuits Push Back

CMB News | Corporate Governance | March 2026

A regulatory shift by the U.S. Securities and Exchange Commission (SEC) is reshaping the balance of power between public companies and their investors — and triggering a wave of litigation.

In November, the SEC altered its longstanding process governing shareholder proposals at annual meetings. Previously, companies seeking to exclude a shareholder resolution from their proxy statements typically required a “no-action” confirmation from SEC staff. Under the new approach, corporate executives have greater discretion to determine which proposals appear on proxy ballots.

The change has introduced legal uncertainty and prompted several high-profile lawsuits.

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A Structural Shift in Shareholder Engagement

The SEC’s revised framework effectively reduces the agency’s direct oversight in disputes over shareholder proposals. Companies now have more authority to omit resolutions without first securing explicit SEC staff approval.

Shareholder advocates argue the move weakens investor rights and injects uncertainty into corporate engagement processes.

“More than anything, this lack of structure and rules is leaving everyone unsure about the best way to move forward,” said Giovanna Eichner, shareholder advocate at Green Century Capital Management.

The policy shift has been viewed by some activists as consistent with broader efforts by Trump-appointed regulators to curb shareholder activism, particularly in environmental, social and governance (ESG) matters.

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Lawsuits Target AT&T, PepsiCo and Axon

At least three companies have already faced legal action following attempts to exclude shareholder proposals:

• AT&T was sued by New York City pension funds after declining to allow a vote on a proposal seeking disclosure of workforce demographic data. The company later agreed to include the proposal as part of a settlement.
• PepsiCo initially sought to exclude a proposal reviewing animal-welfare practices in its supply chain. After the filer sued, Pepsi reversed course and agreed to include the resolution in its proxy materials.
• Axon Enterprises, a manufacturer of stun guns, declined to hold a vote on a proposal regarding political contributions, arguing it would constitute “micromanagement.” The filing foundation has taken the case to federal court, and litigation remains pending.

In each case, investors argued that the SEC’s reduced involvement left them with few options other than litigation to preserve their rights.

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Companies Proceed With Caution

Despite the expanded discretion, companies have not widely exercised their new authority.

According to shareholder advocacy group As You Sow, 47 proxy resolutions have been filed so far this year, with only about six blocked — roughly in line with last year’s rate.

The legal risks appear to be influencing corporate decisions.

“Companies have to decide: Do you want to maintain a good relationship with your shareholders, or do you want to spend millions on corporate attorneys?” said As You Sow CEO Andy Behar.

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Broader Market Implications

The dispute highlights larger themes affecting U.S. capital markets:

• Investor transparency rights
• The future of ESG-related proposals
• The role of regulators in corporate governance
• Legal risk surrounding shareholder engagement

For institutional investors, the situation creates regulatory ambiguity. While companies now possess greater authority, shareholder litigation is emerging as a counterbalance.

The key question is whether courts will effectively redefine the boundaries of shareholder rights — or whether the SEC’s new hands-off approach will endure.

For now, corporate governance in the United States has entered a more contested phase, with legal challenges replacing regulatory mediation as the primary mechanism for resolving disputes.

 

Source: Reuters