The 2025 proxy season saw significant developments with respect to proposals calling on companies to disclose information about their political contribution activity and lobbying activity, including an increase in support for political contribution proposals.[1] That stronger support, particularly against the backdrop of reduced support for socially-oriented shareholder proposals, may lead to more such proposals filed in the 2026 proxy season, which is now underway.
However, there have been several developments over the past year that provide companies with important new tools for addressing these proposals, including guidance from the staff of the SEC’s Division of Corporation Finance (the “Staff”) and several notable no-action decisions during the 2025 proxy season that reflect the Staff’s most recent thinking regarding political law proposals and grounds for exemptions more generally.
These developments are informing the approaches shareholders are taking for bringing proposals on political law topics in the 2026 season and the paths companies are following in evaluating their response to these proposals. Below we provide an overview of the shareholder proposal process, and discuss developments from 2025 and their implications for the 2026 season. We conclude with a discussion of steps to reduce the possibility of receiving a political or lobbying proposal and strategies for dealing with such a proposal if submitted.
The Shareholder Proposal Process
Under SEC Rule 14a-8, a shareholder may submit a proposal for inclusion in a company’s proxy materials, provided the proposal satisfies certain procedural and substantive requirements. If a procedural or substantive requirement is not met, a company has a basis to exclude the proposal. Rule 14a-8(j) requires a company to notify the SEC and proponent of its reasons for excluding a proposal. Historically, companies satisfied this requirement by submitting a request for a “no-action letter” in which the Staff, if it agreed with the company’s arguments, would state that it would not recommend enforcement action to the SEC if the company were to exclude the proposal from its proxy materials.
On November 17, 2025, the Staff issued a statement (the “Statement”)[2] which represents a major change to this well-established practice.[3] The Statement provides that, until at least September 30, 2026, the Staff will not respond to any Rule 14a-8 no-action letter requests, with the narrow exception of those seeking to exclude a proposal under Rule 14a-8(i)(1), which provides an exemption for proposals that are improper under applicable state law. If a company determines that it may exclude a proposal, it must still notify the Staff and the proponent of its reasons for doing so no later than 80 days before filing its definitive proxy statement as required by Rule 14a-8(j). The notice must include an explanation of why the company believes it may exclude the proposal and should, if possible, refer to the most recent applicable authority, such as prior Staff no-action letters. In addition, the notice must also include a supporting legal opinion of counsel when the company’s basis for exclusion is based on matters of state or federal law.
The Statement also provides if a company or its counsel includes an unqualified representation in its notice that there is a reasonable basis to exclude the proposal based on the provisions of Rule 14a-8, prior published guidance and/or judicial decisions, the Staff will respond by letter noting that it will not object to the company’s exclusion of the proposal based solely on the representation. The Statement also notes that the absence of prior Staff responses to similar shareholder proposals and prior Staff responses that declined to confer no-action relief do not mean that companies cannot form a reasonable basis to exclude the same or a similar proposal under the Staff’s new procedures. In subsequent meetings with stakeholders, Staff members have emphasized that historically the vast majority of no-action requests had a reasonable basis to exclude the proposal, regardless of their outcome, and the fact that a proposal may present a close call does not mean that a company cannot represent that it has a reasonable basis to exclude a proposal.
However, the exclusion of a proposal may not be the end of the story, as proponents have a variety of means of responding. For example, a proponent may endeavor to organize a negative media campaign against the company, submit a floor proposal for consideration at the company’s annual meeting in accordance with the company’s advance notice bylaws, solicit proxies under Rule 14a-4 in support of its proposal (rather than having its proposal included in the company’s proxy materials), organize a “vote no” campaign against the reelection of company directors or against other company proposals, submit a books and records demand (including to obtain information about the board’s decision to exclude the proposal or with respect to the company’s political and lobbying activities) or even litigate the company’s decision to exclude the proposal in federal or state court. A proponent’s decision to respond in one or more of these ways may depend in part on the proponent’s analysis of the company’s legal arguments to exclude. If a company asserts legal arguments that the proponent perceives as being “aggressive,” there may be a greater risk of negative shareholder reaction.
While shareholder proposals are generally non-binding, they can still have teeth. Proponents often publicize their proposals and try to draw attention to the merits of the proposal and, in some cases, a company’s perceived failings. Proposals also can garner unwanted media attention, particularly if they concern hot-button issues, and have the potential to become a referendum on a company’s policies or practices, with certain investors and proxy advisors expecting a company to be responsive to proposals that receive significant support, even if the proposal receives less than a majority of votes cast. Successful proposals often invite copycat proposals in future years and companies may find that they have less latitude to act on an issue when doing so in response to a proposal that received majority or meaningful support, particularly if the proposal is written narrowly and calls for specific action.
Political and Lobbying Proposals in 2025
Proposals calling for increased disclosure of political and lobbying spending have been perennial favorites of shareholder proponents, who continued to submit political-related proposals during the 2025 proxy season. There are standard versions of both lobbying and political contribution proposals that proponents have submitted for many years. Typical proposals call for companies to publicly disclose information about their political contributions or their lobbying expenditures. Political contribution proposals often requested that a company disclose (i) its policies and procedures for making direct or indirect political contributions, (ii) the identities of the recipients of the company’s contributions, and (iii) the titles of the company personnel responsibility for managing contributions. Lobbying proposals generally requested similar disclosures with respect to a company’s lobbying activities, which are broadly defined in these proposals.
Other proposals called for companies to provide disclosure with respect to more specific political topics, such as the alignment of a company’s lobbying activities and climate change commitments or a company’s publicly disclosed values and its political activities. Advocacy groups that oppose corporate commitments on environmental, social, and governance (ESG) issues continued to submit “anti-ESG” proposals alleging discrimination based on political or religious views. For example, certain proposals called for the creation of a board committee to oversee and review the impact of the company’s policy positions, advocacy, partnerships and charitable giving on social and political matters, while other proposals called on companies to abolish their diversity programs, policies and goals.
These proposals can be significant because they often ask companies to disclose information that is not otherwise public about the company’s activities, such as donations to 501(c)(4) nonprofit organizations, dues paid to 501(c)(6) trade associations, and other types of advocacy spending. Disclosure of some of this information can bring unwanted public attention. This can be especially true for consumer-facing companies that could face backlash from customers or employees for perceived favoritism of one side of the political spectrum or another, or for an alleged misalignment of stated values with political activity. In addition, collecting the information requested by these proposals can be administratively burdensome, and inaccurate or incomplete disclosures can expose companies to legal risks.
Oftentimes these proposals are targeted at companies with low scores in the CPA-Zicklin Index, a report that ranks the political and lobbying disclosure practices of S&P 500 and Russell 1000 companies. CPA-Zicklin scores are based on a rubric developed by the Center for Political Accountability and the Zicklin Center for Governance and Business Ethics at The Wharton School at the University of Pennsylvania. Companies earn “points” for disclosing various types of information. The Index lists companies in tiers, including a group identified as “basement dwellers” with zero points. CPA also issues model shareholder proposals on these issues.
SEC Provided More Relief in 2025 — But Shareholder Support for Political Proposals Increased
Historically, the SEC staff’s longstanding approach to evaluating political and lobbying shareholder proposals had the effect of making it difficult for companies to exclude these types of proposals through the no-action letter process. This approach dramatically changed with respect to lobbying proposals in the 2025 proxy season, when the SEC staff issued a favorable no-action letter to Air Products and Chemicals, Inc. on November 29, 2024 to exclude the standard lobbying proposal under the Rule 14a-8(i)(7) ordinary business exemption on the grounds that it sought to micromanage the manner in which the company reported its lobbying activities. The company successfully argued that the highly prescriptive nature of the proposal, including the requirement to provide granular disclosure of dozens of distinct pieces of information related to lobbying activities, sought to impermissibly micromanage the company, providing a basis for exclusion of the proposal under Rule 14a-8(i)(7). As a result of this change, the staff granted relief in other instances where companies sought no-action relief for lobbying proposals in the 2025 proxy reason.
Additionally, the SEC staff issued mid-season guidance in the form of Staff Legal Bulletin 14M,[4] which signaled the Staff’s return to evaluating proposals in a manner that is much more favorable to companies.[5] The guidance bolstered companies’ ability to exclude proposals under Rules 14a-8(i)(5) (economic relevance) and 14a-8(i)(7) (ordinary business). The SEC staff also returned to a company-specific approach when analyzing Rules 14a-8(i)(5) and 14a-8(i)(7) in the context of proposals that raise significant social policy issues. Rather than focusing solely on whether a proposal raises an issue that has a broad societal impact or whether particular issues or categories of issues are universally significant, the Staff will focus on the significance of the issue to the company. The Staff’s approach to micromanagement arguments for lobbying proposals and Staff Legal Bulletin 14M meant that fewer political and lobbying proposals reached the ballot during the 2025 season. According to a Georgeson analysis, 16 political contribution proposals and eight lobbying proposals went to a vote during the 2025 season, down from 30 political contribution proposals and 29 lobbying proposals during the 2024 season.[6] Average support for lobbying proposals also fell by roughly half, from 26% in 2024 to 13% in 2025, according to the same analysis.
Despite these developments, shareholder support for political contribution proposals surged in 2025 to an average of 37%, up from 22% in 2024, according to the Georgeson analysis and as detailed in our client alert. Five proposals received majority support. It remains to be seen whether the 2025 surge was a one-off outlier, a natural outcome to a proxy season that followed a presidential election, or the start of a trend toward greater shareholder receptivity to such proposals. Last season’s developments, in combination with the change in Staff procedures reflected in the Statement, indicate that the environment for excluding lobbying shareholder proposals has become more favorable for companies. However, increased support for political contribution proposals in 2025 may create challenges when companies assess their options for such proposals in 2026.
Risk Mitigation Strategies
As always, the best way to defend against an unwanted political contribution or lobbying proposal is not to get one in the first place. As noted above, the targets for these proposals are often companies that receive a low score on the CPA-Zicklin Index. The Index is compiled based on companies’ own disclosures about their political giving on their corporate websites and in their other disclosures. The Index ranks companies on a variety of metrics, and most companies can, with a little effort, earn at least some points and thus avoid being categorized among the “basement dwellers.” For example, points are awarded for publicly disclosing corporate contributions and payments to candidates, party committees, ballot measure committees, and I.R.S. § 527 organizations, and maintaining a public archive of such information; information that is already available on various state and federal websites, but not compiled in one place. A publicly available policy governing political expenditures, and disclosure of managers with final authority over political spending, can also earn points. Companies also have the ability to suggest corrections to their draft score, which provides an opportunity to both correct the record to reevaluate, and in some circumstances augment, disclosures in order to receive a higher score. Additionally, pointing to existing disclosure and potentially offering to expand such disclosure can provide a basis to engage with proponents, particularly if a company still receives a political contribution or lobbying proposal. Regardless of a company’s CPA-Zicklin Index score, each company will need to balance concerns about receiving a proposal with available resources and potential interest in maintaining privacy around its political activity.
Response Playbook
If a company receives a political or lobbying proposal, it should closely evaluate: (i) the shareholder’s explicit or implicit motivations for submitting the proposal; (ii) the requests embedded within the proposal; (iii) the company’s current disclosures and practices; (iv) the result of any engagement with the shareholder; and (v) SEC guidance and the Staff’s past treatment of no-action requests involving similar proposals. Consideration of these factors will help a company determine the level of engagement with the proponent, whether to include or exclude the proposal from its proxy statement and the potential response from the proponent and the company’s shareholder base.
Analyzing a shareholder’s motivations, which the shareholder often describes in the supporting statement to the proposal, can provide helpful context for why a particular company is receiving the proposal and what the proposal is requesting. This analysis, in addition to an assessment of the plain language of the proposal can help a company determine whether or not it is feasible to enhance or change its disclosures and practices as part of a negotiation with the shareholder. For some companies, there may be a desire to address a shareholder proposal by simply acceding to the shareholder’s initial demands. But some demands may not be feasible and may impose significant burdens on the company.
Negotiations with a shareholder can often lead to the withdrawal of a proposal. Companies can strengthen their negotiating position by identifying disclosures or practices that are responsive to the proposal, or by highlighting the existing involvement of the board of directors, or a board committee, in overseeing the company’s political spending and lobbying activities. Disclosures demonstrating the active engagement of the board and describing a company’s existing policies and practices can blunt the impact of a shareholder proposal. If there are elements of a proposal that a company does not believe it can accommodate, a shareholder may be willing to withdraw the proposal in exchange for additional disclosure regarding the company’s political activities and the board’s role in overseeing such activities, as well as for additional disclosure on other topics.
Companies and their counsel can also evaluate the relative strength of arguments that would provide a reasonable basis to exclude the proposal under Rule 14a-8, especially if negotiations are impractical or prove to be unsuccessful. For example, a company that receives a lobbying proposal may be able to determine that, based on the extensive 2024-2025 precedents permitting the exclusion of such proposals on the grounds that they impermissibly sought to micromanage the company, it would have a reasonable basis to exclude the proposal under Rule 14a-8(i)(7). In addition, a company may determine that Staff Legal Bulletin 14M and 2025 precedents regarding proposals addressing other topics provide a reasonable basis to exclude a political law proposal under the economic relevance exemption provided by Rule 14a-8(i)(5). Furthermore, enhanced disclosure can potentially provide a company with a reasonable basis to exclude a proposal from its proxy materials on the basis that it has been substantially implemented within the meaning of Rule 14a-8(i)(10). These analyses, coupled with the greater flexibility provided by the Statement, may improve a company’s negotiating position with the proponent. Because political law proposals, and particularly those related to political contributions, may receive relatively high levels of shareholder support, companies receiving such proposals should carefully consider their options, including weighing the relative risks related to including or excluding the proposal from their proxy materials.
Conclusion
The Statement and the Staff’s updated approach to proposals during the 2025 proxy season will give companies additional leverage to exclude shareholder proposals, including those relating to political contributions and lobbying. In light of these developments, companies faced with a political contribution or lobbying proposal should assess the strength of potential arguments to exclude the proposal, consider engaging with the proponent to determine its motivations and assess the potential reaction from its other stakeholders in connection with any decision to exclude the proposal.
* * *
Covington, one of the few law firms with both nationally recognized political law and securities law practices, has extensive cross-disciplinary experience advising public companies on politically oriented shareholder proposals. For assistance in preparing for or responding to such shareholder proposals, please contact any of the authors listed.
If you have any questions concerning the material discussed in this client alert, please contact the members of our Election and Political Law and Securities and Capital Markets practices.
Back
