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My AI Wrote a Check That I Must Cash: Principles for Principals (The Journal of Robotics, Artificial Intelligence & Law)

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Proving Copying at a Cost: (Another) Cautionary Tale for Brands in Dupe Litigation

NCAA Eligibility: When Does Professional Participation Bar College Competition? (The Legal Intelligencer)

<a href="https://admin.bakerlaw.com/wp-content/uploads/2026/01/BakerHostetler_2026-Proxy-and-Annual-Reporting-Guide.pdf" target="_blank" rel="noreferrer noopener">Download the PDF.</a>

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For the 2026 proxy and annual reporting season, there are a number of key issues to consider as you begin to prepare your annual report and proxy statement. This article provides an overview of these issues and updates in several key areas, including Securities and Exchange Commission (SEC) disclosure and filing requirements, disclosure and corporate governance trends, and updates to proxy voting guidelines by ISS and Glass Lewis.

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<a href="#beneficial-ownership-reporting">BENEFICIAL OWNERSHIP REPORTING</a>

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<a href="#sec-cybersecurity-rules">SEC CYBERSECURITY RULES</a>

<a href="#environmental-social-and-governance-matters">ENVIRONMENTAL, SOCIAL AND GOVERNANCE MATTERS</a>

<a href="#risk-factors">RISK FACTORS AND OTHER DISCLOSURES </a>

<a href="#directors-and-officers-questionnaire">DIRECTORS’ AND OFFICERS’ QUESTIONNAIRES</a>

<a href="#shareholder-proposal-and-proxy-voting-trends">SHAREHOLDER PROPOSAL AND PROXY VOTING TRENDS</a>

<a href="#corporate-governance">CORPORATE GOVERNANCE</a>

<a href="#general-considerations">GENERAL CONSIDERATIONS</a>

<a href="#things-to-watch-in-2026">THINGS TO WATCH IN 2026</a>

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Schedule 13D/13G Accelerated Deadlines and Enforcement Trends (Author: Samuel F. Toth)

Accelerated Filing Deadlines

In 2024, accelerated filing deadlines for Schedules 13D and 13G took effect. The table below summarizes these changes to the filing deadlines.

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Enforcement Developments

Since the accelerated filing deadlines took effect, the Securities and Exchange Commission (SEC) has emphasized timely beneficial ownership reporting through enforcement actions. In September 2024, it imposed more than $3.8 million in civil penalties on 23 different investors (both entities and individuals) for failing to timely report their beneficial ownership and transactions of public company stock on applicable Section 13(d), Section 13(g) and/or Section 16(a) filings (i.e., on Schedule 13D or 13G or Form 3, 4 or 5). Penalties ranged from $10,000 to $750,000.

In 2025, the SEC did not announce any similar large-scale sweeps; however, it did bring a high-profile case against Elon Musk in January 2025, alleging a failure to timely file a Schedule 13D after acquiring more than 5% of Twitter (now known as X). According to the SEC’s complaint, this delay allowed Musk to save at least $150 million at the expense of other shareholders. As of this publication, the case remains actively pending.

It is unclear whether the shift in 2025 from broad sweeps to isolated actions reflects a deliberate recalibration of the SEC’s enforcement strategy or just a temporary change in its approach.

Updates, Insights and Metrics&nbsp;(Author: Craig A. Hoffman)

The realignment of the Securities and Exchange Commission’s (SEC) enforcement priorities in 2025 under the new administration occurred as expected. Companies began 2024 concerned about compliance with the SEC cybersecurity rules, especially the obligation to file a Form 8-K under new Item 1.05 of Regulation S-K within four days of determining that the impact of a cybersecurity incident is material. A series of resolution agreements in early 2024 and the civil enforcement action against SolarWinds and its CISO added to the concern.

By mid-2025, concern about SEC cybersecurity rule compliance and enforcement lessened. Companies filed 24 Forms 8-K under Item 1.05 in 2024, but only 13 in 2025. In November 2025, after a federal court had dismissed most (but not all) of the SEC’s claims, the SEC chose to dismiss its enforcement action against SolarWinds and its CISO. It also remains rare to see securities and governance class action and shareholder derivative claims related to a security incident, although three of the companies that filed Item 1.05 Form 8-Ks are facing them (a cryptocurrency exchange, security technology company and an e-commerce company).

The SEC created a new enforcement unit – the Cyber and Emerging Technologies Unit (CETU) – in early 2025 to combat cyber-related misconduct, including (1) regulated entities’ compliance with cybersecurity rules and (2) public issuer fraudulent disclosure relating to cybersecurity.

The SEC Division of Examinations announced its 2026 examination priorities in November 2025, and they include (1) cyber resilience to prevent disruption to mission-critical services, (2) security controls to safeguard customer records (with a focus on governance, DLP, access controls, account management and incident response), (3) oversight of vendors and (4) incident response programs related to Regulation S-P amendments.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE MATTERS

Reexamining DE&amp;I Initiatives&nbsp;(Author: Sean D. Cheatle)

Corporate Retreat from DE&amp;I Efforts

In recent years, calls for greater diversity in organizations led to a significant increase in board engagement with diversity, equity and inclusion (DE&amp;I) issues and the implementation of robust DE&amp;I policies. However, the U.S. Supreme Court’s landmark affirmative action ruling in Students for Fair Admissions v. Harvard, sustained pressure from shareholder activists and politicians, and private litigation challenges catalyzed a large-scale corporate retreat from DE&amp;I initiatives. Examples of actions taken to curb these efforts include eliminating DE&amp;I training programs, retiring goals for achieving diversity in senior leadership, no longer giving priority treatment to women- and minority-owned suppliers, and suspending participation in the Human Rights Campaign Corporate Equality Index, which measures workplace inclusion for LGBTQ+ employees. Some companies are redirecting the focus from DE&amp;I efforts toward operational efficiency. Beyond the corporate sector, DE&amp;I initiatives are also being scaled back in educational institutions. Several states, including Utah, Alabama, Iowa, Florida, Texas, Arkansas, Kansas, Ohio and Kentucky, have banned DE&amp;I offices in their public universities, and several private universities, including the Massachusetts Institute of Technology and Harvard University’s Faculty of Arts and Sciences, have eliminated their faculty diversity requirements.

Allan Schweyer, principal researcher at The Conference Board’s Human Capital Center, explained that the primary driver behind companies making these changes is a reassessment of their legal risk exposure, which began after the&nbsp;Students for Fair Admissions&nbsp;case. Since then, conservative organizations have leveraged the arguments made in&nbsp;Students for Fair Admissions&nbsp;to successfully challenge diversity programs in other sectors, including government contracting. Efforts to reverse DE&amp;I initiatives have continued to intensify under President Donald Trump’s administration.

Despite the recent retreat from DE&amp;I initiatives by many corporations, it is unlikely that these efforts will disappear entirely. DE&amp;I policies have become deeply embedded in and valued by corporate culture over the past decade, and their complete removal could alienate key stakeholders, including employees, consumers and investors who view these initiatives as essential to fostering equitable workplaces and broader social responsibility. Certain stakeholders, particularly those aligned with environmental, social and governance priorities, may redirect their investments elsewhere. At the same time, this must be balanced against the legal landscape in light of the&nbsp;Students for Fair Admissions&nbsp;decision, which may expose companies to heightened legal risk if their diversity initiatives are perceived as discriminatory. Many companies have adjusted their DE&amp;I strategies to navigate both social and legal pressures, choosing to reframe DE&amp;I initiatives in order to reduce public disclosure while maintaining internal tracking. DE&amp;I-related messaging has been significantly reduced in public filings during 2025, with many filers choosing to replace visible DE&amp;I markers with more opaque references to inclusion. While DE&amp;I messaging has been softened, a baseline commitment to inclusivity and equity will likely persist moving forward.

Nasdaq Diversity Rules Struck Down

On Dec. 11, 2024, the U.S. Court of Appeals for the Fifth Circuit struck down the diversity disclosure rules proposed by Nasdaq and approved by the Securities and Exchange Commission (SEC). The Nasdaq rules required most companies listed on the Nasdaq exchanges to (1) disclose board-level diversity statistics in their company’s proxy statement (or if the company did not file a proxy, on Form 10-K or Form 20-F) or on their website, and (2) achieve an aspirational target of at least two diverse board members (female and minority or LGBTQ+) or explain the company’s reason for not meeting the diversity objective. The court ultimately determined that the SEC exceeded its authority under the Securities Exchange Act of 1934 by approving the rules in 2021. Nasdaq announced that it does not intend to appeal the court’s decision, and the SEC has not pursued an appeal.

Proxy advisory firms and institutional investors are taking a more cautious approach to diversity policies and practices in light of the changing regulatory landscape.

In 2025, Institutional Shareholder Services indefinitely halted consideration of certain diversity factors in making voting recommendations with respect to directors at U.S. companies and recently announced a change to its approach on shareholder proposals from broad support to considering proposals on a case-by-case basis.

Glass Lewis, on the other hand, has acknowledged the shifting approach to board diversity but continues to support its prior diversity guidance. Glass Lewis has supplemented its guidance by including a flag on any proxy recommendation that is based, at least in part, on diversity considerations, and client investors may then choose whether to consider such recommendation in casting their proxy votes.

Institutional investors are similarly cautious and are navigating the changing landscape by removing numerical diversity targets and rewording policies to emphasize diversity of personal characteristics, inclusive of gender and race.

Despite the court’s ruling and the hesitation of institutional investors and proxy advisers, many other parties remain focused on enhanced board diversity. Shareholders may submit proposals requesting that companies increase their board diversity efforts, such as by embedding a commitment to diversity in governance documents. We have seen such proposals submitted by state-sponsored retirement and scholarship funds, often citing studies and guidelines from large institutional investors. In light of the sustained focus on this element of board composition, we expect many public companies will voluntarily disclose some form of board diversity information moving forward, even if quantitative targets are pared back and language is softened.

Navigating Uncertainty Surrounding Climate Disclosure Rules (Author: Jeffrey S. Spindler)

On March 27, 2025, the Securities and Exchange Commission (SEC) announced that it voted to end its defense of the final rules on the climate-related disclosures for investors that the SEC adopted on March 6, 2024. These rules would have required domestic and foreign registrants to include climate-related information in their registration statements and periodic reports.

Some issuers may nonetheless be subject to new state and international rules requiring transparency on climate-related matters. For large companies operating in California, emissions disclosure rules are scheduled to take effect in 2026 subject to an ongoing legal challenge. In addition, companies with a sufficient presence in Europe may have to comply with the EU’s emissions reporting requirements as these rules begin to take effect with a phase-in through 2029. These requirements are coupled with continued investor pressure, even if scaled back compared with prior years, to inform the market regarding climate-related risks, opportunities and initiatives in accordance with prevailing voluntary standards.

For a snapshot regarding the prevalence and quality of voluntary disclosures, a <a href="https://www.ey.com/en_us/insights/climate-change-sustainability-services/ey-nature-risk-barometer" target="_blank" rel="noreferrer noopener">recent report</a> by EY, titled “Nature Risk Barometer,” evaluated the broader nature-related disclosures by more than 300 companies across 10 SICS sectors in the U.S., Canada and Latin America compared with the Taskforce on Nature-related Financial Disclosure (TNFD) recommendations in the areas of Governance, Strategy, Risk and Impact Management, and Metrics and Targets. Findings from this study include:

Sixty-six percent of U.S. companies, 72 percent of Canadian companies and 89 percent of Latin American companies have provided some level of nature-related disclosure associated with one or more of the 14 TNFD-recommended items. Companies in the extractives and minerals processing category had the highest level of disclosure (at 91 percent), food and beverage companies were second (at 88 percent) and financial companies had the lowest level (at 48 percent).

Assessing the quality of a company’s disclosures in relation to the TNFD recommendations (based on the degree of alignment with the standards, considering the level of detail and how well the disclosures meet the recommendations) shows that, once again, extractives and minerals processing companies scored the highest and financial companies scored the lowest.

In the area of Governance, only 5 percent of companies go beyond ESG and sustainability as areas specified for direct board oversight, such as by noting responsibilities relating to nature or biodiversity. Companies with the strongest TNFD coverage and alignment tended to disclose that they have dedicated cross-functional working groups focused on specific issues such as biodiversity, water stewardship, deforestation and ecosystem restoration.

In the area of Strategy, 27 percent of companies specifically address biodiversity as part of their sustainability agenda.

In the area of Risk and Impact Management, integration of nature-related risks into companies’ broader enterprise risk management frameworks is still relatively rare, and disclosures are limited regarding the financial impact of nature-related dependencies and effects.

Nearly half of companies provided nature-related metrics, mostly related to water use, discharge and withdrawal as well as afforestation, deforestation and the identification of key species and threatened habitats. A smaller number of companies are setting targets in key areas, for example, to:

Artificial Intelligence Disclosures&nbsp;(Author: Brittany Stevenson)

In recent years, the use of artificial intelligence (AI), which has the capacity to provide new capabilities by imitating human intelligence, performance and comprehension, has increased drastically. AI is being used by companies across various sectors in many ways, including to improve operations, research and development, and data analytics, among other areas. As a result, AI has and may continue to impact and advance a company’s business, but its use also comes with inherent oversight responsibility and risks that companies must carefully consider, implement, manage and disclose.

In fact, companies are increasingly including AI-related disclosures in their filings. These disclosures often address the following areas:

Board and Committee Oversight: Companies are increasingly disclosing which board committee, such as the audit, technology or governance committee, has responsibility for AI oversight, with most committee-level oversight being performed by the audit committee, and whether these responsibilities are formalized in committee charters. Companies should also consider disclosing how the board or its committees monitor AI-related risks and opportunities and whether ad hoc or working groups are formed to address emerging issues. In some cases, companies may engage external advisers or experts to support the board’s understanding of AI, and disclosing these practices may further demonstrate the company’s commitment to governance.

Director Qualifications and Ongoing Education: Some companies have updated director biographies and skills matrices to reflect AI-related experience, certifications or ongoing education. Companies should consider describing whether and how the board addresses its knowledge and company use of AI – through regular board updates, briefings, conferences or advisories – which may increase stakeholders’ confidence in the board’s ability to oversee AI.

Risk Factors: Companies often include AI-related risk factors in their disclosures, but they should ensure these are clear, specific and tailored to their actual use of AI. Risk factors should describe risks relevant to the company’s operations while avoiding boilerplate or generic statements. There should also be a reasonable basis for any prospective risks or claims described, and to be mindful of regulatory expectations regarding the accuracy and completeness of such disclosures. Recent enforcement actions and regulatory guidance have emphasized the need to avoid exaggeration or “AI washing” in public statements about AI capabilities.

While companies are increasingly including AI-related risk factors in their disclosures, they should also stay aware of regulator and stakeholder expectations regarding the type and quality of these disclosures, which are rapidly evolving. Notably, the Securities and Exchange Commission (SEC) has indicated a new approach to AI and cybersecurity disclosures. Though previous leadership advanced rulemakings to address these risks, the current SEC chair has rescinded several proposed rules and is instead focusing on supporting innovation and reviewing disclosure requirements. For now, enforcement actions against companies for AI washing and misleading statements about AI use have continued, and the SEC has indicated that it will continue to monitor and act against fraud and manipulation in this area.

International Conflicts; China (Author: Alexander M. Davis)

Companies should consider whether the continuation of international conflicts, including the war between Russia and Ukraine, the conflict in the Middle East, rising tensions between China and Taiwan, and related sanctions and escalations, should be discussed in their risk factors. In May 2022, the Securities and Exchange Commission (SEC) published a&nbsp;<a href="https://www.sec.gov/rules-regulations/staff-guidance/disclosure-guidance/sample-letter-companies-regarding-disclosures" target="_blank" rel="noreferrer noopener">sample comment letter</a>&nbsp;regarding potential disclosure obligations that companies may have under federal securities laws relating to the direct or indirect impact that Russia’s invasion of Ukraine and the related international response have had or may have on a company’s business. The sample comment letter and guidance advised that companies should provide detailed disclosure regarding any direct or indirect exposure to Russia or Ukraine through, among other things, the company’s operations, employee base, investments, sanctions or legal or regulatory uncertainties, and any actual or potential disruptions to the company’s supply chains.

While the SEC has not issued official guidance or a sample comment letter concerning the conflict between Israel and Hamas in the Middle East or other recent international conflicts as of the date of this alert, the May 2022 sample comment letter should be used as guidance as to how the SEC will likely view disclosure obligations relating to such conflicts. Recent comments issued by the SEC on registration statements relating to the conflict in the Middle East and the resulting impact on a company’s business are similar to comments it has previously issued concerning the impact of the war in Ukraine. Consequently, companies that have any direct or indirect exposure to the conflict in Israel - or in the Middle East more broadly, or such other areas located within war zones or at risk for hostilities, should consider providing risk factor disclosure of the potential or actual impact on their business and related risks stemming from the continuation and escalation of such conflicts. For example, companies with assets and operations in a region with conflict have disclosed as a risk their vulnerability to property damage, inventory loss, business disruption and expropriation resulting from the conflict, while other companies have disclosed the risk of certain company personnel being obligated to serve as reserves or in the military in these regions and the impact this would have on business operations. It is also important that companies take a fresh look at their prior risk factor disclosures regarding the impact of international conflicts, if any, in light of recent developments and consider whether updates are warranted.

Similarly, companies should consider providing detailed disclosure relating to specific risks to their businesses resulting from their business exposure to China. In July 2023, the SEC provided guidance and a <a href="https://www.sec.gov/rules-regulations/staff-guidance/disclosure-guidance/sample-letter-companies-regarding-china" target="_blank" rel="noreferrer noopener">sample comment letter</a> regarding the disclosure obligations of companies based or with a majority of their operations in China, including the SEC’s continued focus on and request for specific disclosure about material risks relating to the role of the government of China in the operations of China-based companies. The risk factors and disclosure obligations for China-based companies detailed in the July 2023 sample comment letter should be reviewed and considered by any company with business exposure to China, regardless of whether it is based in China. Non-China-based companies with operations in China should also consider the impact of recent developments in the region when preparing their risk factor disclosure. China’s economy is facing a variety of economic challenges that may impact companies with business exposure to the region, particularly with regard to supply chains and sales activities there.

In addition to these economic uncertainties, companies should consider the actual or potential impacts of rising geopolitical and trade tensions between the U.S. and China, including the ongoing dispute over the fate of Taiwan and tariffs and export controls implemented and proposed by the Trump administration. Similar to the analysis described above relating to the international conflicts in Ukraine and the Middle East, companies with direct or indirect exposure to China should carefully consider any actual or potential impact these recent developments in China may have on the company’s operations, investments, sales activities, manufacturing activities and supply chains when determining whether updates are needed to their disclosures of risk factors and in their Management’s Discussion and Analysis.

Evolving US Legal and Political Landscape (Author: Alexander M. Davis)

The reelection of President Donald Trump and the Republican majorities in the U.S. Senate and House of Representatives have brought and may continue to bring further substantial changes to policy across a variety of economic sectors. As Trump and his team have undertaken the first year of their transition back to power, several themes have emerged that public companies should consider when preparing disclosure to their shareholders.

On trade, Trump has followed through with his preelection-stated plan of using tariffs, and the threat of tariffs, to help achieve national policy goals, such as border security and trade imbalances. Public companies whose businesses depend on international trade, particularly trade with China, have disclosed that trade wars, tariffs and turmoil in international trade agreements could reduce demand for products and services, increase costs, reduce profitability or adversely impact supply chains that may be material to their businesses. Companies should consider any actual impacts experienced to date by such tariffs and should update their risk factors to keep abreast of public statements and executive actions from Trump and his team to best reflect the emerging risks to global trade, even with long-standing allies and trading partners such as Canada and Mexico, which have been the subject of various tariffs and threats of continued tariffs by the Trump administration. Companies should further assess whether any actual or threatened retaliatory measures by trade partners of the U.S. warrant additional risk factor disclosure. In identifying such risks, it is recommended that companies identify specific geographies as well as specific products or materials that have been or may be affected by such trade relations.

A number of companies in highly regulated industries, such as the healthcare and pharmaceutical industries, have already included risk factors to note that Loper Bright and other related Supreme Court cases, such as Corner Post, Inc. v. Board of Governors of the Federal Reserve System and Securities and Exchange Commission v. Jarkesy, may introduce additional uncertainty into the regulatory process and may result in additional legal challenges to actions taken by federal regulatory agencies. While it appears that the Department of Government Efficiency has ramped down its operations, public companies in regulated industries should consider building out their risk factors in light of the actions that the Trump administration has taken over the past year and the administration’s stated intentions to continue to limit or outright remove certain regulatory agencies, including its intention to use Supreme Court precedent and other legal tools to disrupt or disband government agencies, reduce head count in the federal government, reduce government regulation and create efficiencies in government spending wherever possible.

DIRECTORS’ AND OFFICERS’ QUESTIONNAIRES

Questionnaire Updates for Consideration&nbsp;(Author: Brittany Stevenson)

Directors’ and officers’ questionnaires are important for both compliance and risk management, providing a means to collect and verify information related to leadership that a company may not be able to determine otherwise. When preparing for the 2026 proxy and annual reporting season, companies should consider the following potential updates to their form of directors’ and officers’ questionnaires:

Artificial Intelligence (AI):&nbsp;Request information about a director’s or officer’s background or expertise related to AI in light of the increasing need for technological competence among board members.

Director Diversity:&nbsp;For Nasdaq-listed companies, consider modifying or removing the optional questions soliciting responses related to Nasdaq’s director diversity matrix and related rules, given that such disclosure requirements have been effectively struck down.

SHAREHOLDER PROPOSAL AND PROXY VOTING TRENDS

SEC Announces Pause in Substantive No-Action Letter Responses to Rule 14a-8 Requests (Authors: Janet A. Spreen and Sean D. Cheatle)

The SEC’s Division of Corporate Finance (the Division) <a href="https://www.sec.gov/newsroom/speeches-statements/statement-regarding-division-corporation-finances-role-exchange-act-rule-14a-8-process-current-proxy-season" target="_blank" rel="noreferrer noopener">announced</a> on Nov. 17, 2025, that it is pausing substantive review of no-action requests concerning the exclusion of shareholder proposals under Rule 14a-8 of the Exchange Act of 1934, as amended. The SEC explained that due to the backlog of registration statements and other filings requiring staff attention following the government shutdown, as well as the body of guidance on Rule 14a-8 from the SEC available to both companies and proponents, it will not express views on companies’ intended reliance on Rule 14a-8 for exclusion of shareholder proposals (other than no-action requests pertaining to Rule 14a-8(i)(1), as discussed below). The pause applies both to the current proxy season, which the SEC has defined as Oct. 1, 2025, through Sept. 30, 2026, and to any no-action requests received before Oct. 1, 2025, to which the Division has not yet responded.

How do companies proceed during the pause?

First, a company intending to exclude shareholder proposals must still comply with Rule 14a-8(j), which requires companies to provide notice to the SEC and to proponents no later than 80 calendar days before filing a definitive proxy statement. Such requirement is exclusively informational, however, and does not require companies to seek the staff’s views on any planned proposal exclusions. Companies are to use the SEC’s online&nbsp;<a href="https://www.sec.gov/forms/shareholder-proposal" target="_blank" rel="noreferrer noopener">Shareholder Proposal form</a>.

Second, the Division recognized that a company may wish to receive some response to its exclusion notification. As such, a company seeking a response to its notification that it intends to exclude a proposal from its proxy materials must include, as part of its notification pursuant to Rule 14a-8(j), an unqualified representation that the company has a reasonable basis to exclude a shareholder proposal based on (1) the provisions of Rule 14a-8, (2) prior published guidance and/or (3) judicial decisions. The Division will respond with a letter indicating that, based solely on the company’s representations, it will not object to a company omitting a shareholder proposal from its proxy materials. But again, the Division stated that it will not substantiate the adequacy of the company’s representations. It appears that the SEC will be posting company 14a-8(j) notices and the SEC’s responses on its website.

Whether or not a company decides to seek a response from the Division, it should carefully interpret (in consultation with its legal counsel) existing SEC guidance and case law. Responses to prior no-action requests and Rule 14a-8(j) notices are nonbinding, so a company may reasonably reach a different conclusion from that guidance, but it also is not insulated from an enforcement action or lawsuit by the proponent by relying on SEC guidance. Proponents can sue in federal court to force a company to include a shareholder proposal.

The pause does not apply to no-action letters regarding Rule 14a-8(i)(1).

The Division will continue to substantively review no-action letter requests regarding the application of state law and Rule 14a-8(i)(1), which allows exclusion of a 14a-8 shareholder proposal if it is not a “proper subject” for action under the laws of the jurisdiction in which the excluding company is incorporated.

Whether nonbinding shareholding proposals, also referred to as “precatory proposals,” are a proper subject under Delaware law has come under scrutiny recently. While the Delaware courts have not directly held on whether precatory proposals are proper, on Oct. 9, 2025, SEC Chairman Paul Atkins <a href="https://www.sec.gov/newsroom/speeches-statements/atkins-10092025-keynote-address-john-l-weinberg-center-corporate-governances-25th-anniversary-gala" target="_blank" rel="noreferrer noopener">remarked</a>&nbsp;that the SEC staff is amenable to supporting the exclusion of precatory proposals to Delaware companies via no-action letter responses. Given the limited available guidance for companies and proponents to rely on in this area and this development, the SEC determined it would continue to provide guidance in this area.

Chairman Atkins expressed the view that precatory proposals, which are nonbinding and typically focus on environmental and social issues that are not material to the company, consume a significant amount of time and impose costs on the company. He further stated that if, as some argue, shareholders do not have a fundamental right under Delaware (or other state) law to propose or vote on such proposals, a company could seek no-action relief, and if it is accompanied by a supporting legal opinion from counsel that the proposal was not a proper subject for shareholder action under state law, he had “high confidence that the SEC staff would honor that position.”

Eliminating precatory proposals under Delaware law would significantly pare back shareholder proposals under Rule 14a-8. It will be interesting to see how companies and proponents react to this development.

Shareholder Proposal Trends (Authors: JR Lanis and Macy M. Hawkins)

Environmental, Social and Governance (ESG) Proposals

Environmental proposals accounted for 16% of all submissions in 2025, a slight decrease from 17% in 2024, with 133 proposals submitted (excluding 14 anti-ESG environmental proposals). Despite this decline in volume, the relative share of environmental proposals remained stable, indicating that environmental issues continue to be a significant concern for shareholders. However, support for these proposals continued its multiyear downward trend, with none of the 72 environmental proposals that went to a vote receiving majority support. This represents a 13% decrease in the number of environmental proposals voted on compared to the previous year.

The most common environmental topics in 2025 were greenhouse gas reduction (including Scope 3 emissions), plastic and sustainable packaging, and emissions financing. The persistent lack of majority support and declining passage rates for environmental proposals reflect both shifting investor priorities and the impact of regulatory changes that have made it easier for companies to exclude such proposals from their proxy materials.

Social proposals also experienced a significant decline, with 223 submissions in 2025 (down 33% from 335 in 2024), representing 27% of all proposals. Of the 109 social proposals that went to a vote, only four passed, all of which related to political contributions. There was a marked reduction in diversity, equity and inclusion proposals, with only 13 submitted in 2025 ‒ less than half the volume of the previous two years. Average support for social proposals fell from nearly 20% in 2024 to 17% in 2025, continuing a downward trend observed since 2023.

Governance-focused proposals remained robust, with 356 submissions in 2025 (excluding anti-ESG proposals), a figure comparable to the 377 filed in 2024. These proposals enjoyed relatively high levels of shareholder support and passage rates, with 46 of the 240 governance proposals passing. Notably, there was increased support for proposals related to board declassification, severance pay and majority voting in director elections, with support for these topics rising by 16%, 7% and 6%, respectively, compared to 2024.

The 2025 season was characterized by an increase in anti-ESG proposal activity. The number of anti-ESG proposals rose by 36% from 94 in 2023 to 128 in 2025. Despite this growth, anti-ESG proposals continued to receive minimal shareholder support, averaging just 2.9%. The majority of anti-ESG proposals focused on social topics, with smaller proportions addressing governance and environmental issues.

Impact of SEC Guidance and No-Action Relief

The regulatory environment in 2025 was profoundly shaped by the SEC’s issuance of SLB 14M, which reinstated a company-specific approach to evaluating the significance of policy issues under Rule 14a-8. This change made it easier for companies to exclude proposals that, while addressing broad social or ethical concerns, were not deemed significant to the company’s specific business operations. As a result, there was a substantial increase in the number of no-action relief requests (342 in 2025, up 29% from 2024 and nearly double the 2023 figure).

However, on Nov. 17, 2025, the SEC’s Division of Corporation Finance declared that it would no longer respond to or provide substantive views on most no-action requests from companies seeking to exclude shareholder proposals under Rule 14a-8, except for those based on state-law propriety under Rule 14a-8(i). This decision was driven by a backlog of regulatory filings and resource limitations following the federal government shutdown, and it applies to the entire 2025-2026 proxy season, including pending requests.

The immediate impact is that companies must now proceed without the traditional assurance of SEC staff review when excluding shareholder proposals, increasing the risk of disputes, litigation and market scrutiny.

The 2025 proxy season was characterized by stability in overall shareholder proposal activity but significant shifts in the composition, support and outcomes of those proposals. Governance proposals remained resilient, while environmental and social proposals continued to decline in both volume and support. The rise in anti-ESG activity, coupled with increased exclusions facilitated by the SEC’s revised guidance, underscores the evolving and contested nature of shareholder engagement on ESG issues.

Proxy Advisory Firms (Author: Sean D. Cheatle)

Institutional Shareholder Services (ISS) and Glass, Lewis &amp; Co. (Glass Lewis) recently released their benchmark proxy voting updates for the 2026 proxy season.

ISS released its <a href="https://insights.issgovernance.com/posts/iss-governance-announces-2026-benchmark-policy-updates/" target="_blank" rel="noreferrer noopener">benchmark proxy voting updates</a> on Nov. 25, 2025. While the updates are largely modest, companies should be aware of how certain changes build on previous trends.

Unequal Voting Rights ISS has eliminated inconsistencies in the treatment of capital structures with unequal voting rights between “common” and “preferred” stock, regardless of classification. ISS recommends an adverse or withheld vote if the company employs a multiclass capital structure with unequal voting rights, which generally includes classes of stock that have additional votes per share or classes that are not entitled to vote on the same ballot items or director nominees. This policy excludes preferred shares that vote on an “as-converted basis” and situations where enhanced voting rights are limited in duration and applicability.

Pay-for-Performance Evaluation Factors The period for quantitative measures to assess alignment of pay and performance has been extended from a three-year period to a five-year period. Such measures include the company’s total shareholder return and the CEO’s annualized total pay rank within a peer group. ISS also extended the time frame for measuring the CEO’s annualized pay relative to the peer group median from the most recent fiscal year to one- and three-year periods.

Time-Based Equity Awards ISS emphasized the importance of the ratio of performance- to time-based long-term incentive awards and the long-term focus of vesting requirements for equity awards. This change reflects the desire of institutional investors to have a more flexible quantitative approach to equity compensation pursuant to which time-based equity can comprise most, if not all, of equity compensation so long as it is long term in nature.

Say-on-Pay Communications and Responsiveness ISS approved a more flexible approach for companies to address low say-on-pay support when feedback is limited. If a company is unable to obtain specific feedback but it has disclosed meaningful engagement efforts, then ISS will assess the company’s actions as well as the company’s explanations for why such actions are beneficial to shareholders. This update acknowledges recent Securities and Exchange Commission (SEC) guidance regarding passive versus active (13G vs. 13D) filing status for institutional investors, which may make it more difficult for issuers to solicit feedback. This modest change allows for more flexibility in how companies can demonstrate engagement in response to low say-on-pay vote support.

High Nonemployee Director (NED) Pay In response to multiple instances of problematic NED pay decisions since the implementation of the NED pay policy in 2019, ISS will have expanded authority to issue adverse recommendations where ISS sees a pattern of NED compensation awards (i.e., for two or more consecutive or nonconsecutive years of excessive NED compensation). In addition, adverse recommendations may be issued in the first year for egregious NED compensation issues, such as particularly large NED pay compared with industry peer medians or pay that exceeds that of a company’s executive officers, or inadequate disclosures or an insufficient rationale justifying unusual NED payments.

Equity Plan Scorecard ISS added a new scored factor into the <a>Equity Plan Scorecard </a>(EPSC) under the Plan Features Pillar that assesses whether a plan in which NEDs participate discloses cash-denominated award limits, which ISS views as a best practice. This new factor will only apply to the S&amp;P 500 and Russell 3000 EPSC models for 2026.

Climate Change, Greenhouse Gas (GHG) Emissions and Diversity/Equity Proposals ISS has adopted a case-by-case approach for climate change, GHG emissions and diversity/equity of opportunity-related shareholder proposals to reflect the general improvement in company disclosures and practices as well as the increasingly varied regulations on these disclosure matters.&nbsp;

Glass Lewis released its <a href="https://www.glasslewis.com/policy-guidelines?year=2026" target="_blank" rel="noreferrer noopener">benchmark proxy voting updates</a> on Dec. 4, 2025. Beginning in 2027, Glass Lewis will tailor its voting recommendations based on the investor’s custom instructions or investment philosophies and priorities. For 2026, Glass Lewis will continue to provide its benchmark recommendations, including two new items and several clarifying revisions to existing policies.

Unlike ISS, Glass Lewis affirmed its existing board diversity policies, which include voting against the nominating committee chair for boards of (i) Russell 3000 companies without at least 30 percent gender-diverse directors, (ii) non-Russell companies without any gender-diverse directors and (iii) Russell 1000 companies with fewer than one director from an underrepresented community.

Mandatory Arbitration Provisions Glass Lewis now evaluates whether a company has adopted a mandatory arbitration provision following an IPO, spinoff or direct listing and will recommend against the election of the chair of the governance committee or, in certain circumstances, the entire committee. Absent sufficient rationale from the company, Glass Lewis will generally recommend against bylaw or charter amendments adopting a mandatory arbitration provision.

Pay-for-Performance Methodology Glass Lewis proprietary pay-for-performance model has been modified to reflect a scorecard-based approach consisting of up to six tests, which will be aggregated on a weighted basis to determine a score from 0 to 100. This system replaces the single letter grade of A through F previously used.

Shareholder Rights Consideration of cases where the board has amended governing documents to reduce or remove shareholder rights has been expanded to include additional examples that may lead to adverse recommendations, such as (i) limiting the ability of shareholders to submit shareholder proposals, (ii) limiting the ability of shareholders to file derivative lawsuits and (iii) replacing majority voting standards with plurality voting.

Amendments to the Certificate of Incorporation Glass Lewis’ approach to amendments to a company’s governing documents has been streamlined to evaluate proposed amendments on a case-by-case basis. Bundling several amendments under a single proposal is disfavored since this practice prevents shareholders from reviewing each amendment individually. Generally, Glass Lewis will recommend voting for amendments that are unlikely to have a material adverse effect on shareholders.

Supermajority Vote Requirements The policy on supermajority vote requirements has been clarified to specify that cases in which a company seeks to abolish supermajority voting requirements will be evaluated on a case-by-case basis. In order to protect the interests of minority shareholders, however, Glass Lewis may oppose proposals in which a company with a large controlling shareholder attempts to abolish supermajority vote requirements.

General Approach to Shareholder Proposals In light of the <a href="https://www.bakerlaw.com/insights/sec-announces-pause-in-substantive-no-action-letter-responses-to-rule-14a-8-requests/" target="_blank" rel="noreferrer noopener">SEC announcing the pause of its substantive review of no-action letter requests regarding Rule 14a-8</a>, Glass Lewis has removed its language on companies’ treatment of the SEC’s former no-action process. Glass Lewis has reiterated, however, that it will generally approve of shareholders being afforded the opportunity to vote on material matters.

Advance Notice Bylaws (Author: John J. Harrington)

However, advance notice bylaws that are overly restrictive or burdensome, or that are applied inequitably, may have the effect of disenfranchising stockholders, as was found in&nbsp;Kellner v. AIM Immunotech, Inc., et al., Case No. 2023-0879. In Kellner, the Delaware Supreme Court found that certain advance notice bylaws were unenforceable, as they were adopted on a “cloudy” day, with the threat of a proxy contest imminent, and primarily adopted to “interfere with [the nominating stockholder’s] nomination notice, reject his nominees, and maintain control.” For additional information on the&nbsp;Kellner&nbsp;ruling, see our&nbsp;<a href="https://www.bakerlaw.com/insights/the-delaware-supreme-court-provides-clarity-for-advance-notice-bylaws/" target="_blank" rel="noreferrer noopener">alert</a>&nbsp;“The Delaware Supreme Court Provides Clarity for Advance Notice Bylaws,” dated Nov. 4, 2024.

Advance notice bylaws, which are provisions in a public company’s bylaws that guide the process for stockholders to provide advance notice of proposals or director nominations to be voted on at an annual meeting, generally benefit both companies and stockholders. They require nominating stockholders to provide certain information about themselves, certain related parties, nominees and any proposals within a stated period of time prior to the annual meeting, which allows the company to consider this information and make informed decisions when responding.

In the wake of&nbsp;Kellner, there has been a series of challenges to the advance notice bylaws of Delaware corporations. Notable decisions by the Delaware Court of Chancery in the past year include:

In Carroll v. Burnstein, C.A. No. 2024-0317-LWW (Del. Ch. Aug. 25, 2025), the court dismissed a facial challenge to a bylaw’s validity. The case involved a challenge to an advance notice bylaw based largely on an allegedly overbroad “acting in concert” disclosure provision. Unlike in Kellner, the bylaw in question was adopted on a “clear” day without threat of a proxy contest and the challenge did not relate to an active proxy contest. In this type of challenge, the court conducts a legal analysis and the plaintiff must show that the challenged bylaw “cannot operate lawfully under any set of circumstances.” The court determined this high bar was not met and dismissed the case.

In Siegel v. Morse, C.A. No. 2024-0628-NAC (Del. Ch. April 14, 2025), the court dismissed an equitable challenge to the enforceability of an advance notice bylaw provision due to a lack of ripeness. In this case, the stockholder, who had not made any nominations and did not intend to do so, was not challenging the facial validity of the bylaw provision. While a legal challenge to the facial validity of an advance notice bylaw may be considered absent a ripe dispute, as was the case in Carroll discussed above, the same is not true for an equitable challenge to enforceability. Because there was no “genuine, extant controversy,” the court dismissed the case.

In Vesjeli v. Duffy,C.A. No. 2025-0232-BWD (Del. Ch. May 21, 2025), the court, applying enhanced scrutiny, found that directors violated their fiduciary duties by reducing the number of directors up for election in the face of a proxy contest (i.e., on a “cloudy” day). At the same time, the court upheld the directors’ rejection of an advance notice of nominations, largely based on a claimed failure by the nominating stockholders to disclose group arrangements and understandings, finding that the stockholders failed to demonstrate compliance with the bylaws and that the directors demonstrated that their rejection was not inequitable. However, to remedy the breach of fiduciary duties, the court required that a new 10-day nomination period be reopened.

These decisions demonstrate that stockholders challenging advance notice bylaw provisions face a high bar. However, that bar is not insurmountable. Directors reviewing or considering new advance notice bylaw provisions should ensure that these provisions are clearly drafted, seek relevant information and do not impose an unreasonable burden on stockholders. As the court noted in Carroll,“[g]ood corporate governance counsels in favor of clear and straightforward bylaws. And careful drafting balances the board’s need for orderly nominations with stockholders’ fundamental right to exercise the franchise, while minimizing litigation risk.”

Board Practices and Potential Enhancements (Authors: Janet A. Spreen and James-Paul Cumming)

Recent surveys of public company boards, general counsels and corporate secretaries reveal a landscape marked by increasing complexity, heightened expectations, and a growing demand for accountability and strategic foresight. Drawing on several major 2025 surveys,<a href="#_ftn1" id="_ftnref1">[1]</a> this article summarizes key findings and offers actionable recommendations for boards seeking to enhance their effectiveness, including through a focus on technology.

Preparing for the 2026 Proxy and Annual Reporting Season: Key Issues and Considerations

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