How Investors Are Adapting to the SEC's Deregulatory Agenda, and What to Do About It

The Deregulatory Landscape

In his year as SEC Chairman, Paul Atkins has articulated a disclosure reform philosophy organized around several fundamental principles: simplification, scalability, financial materiality, and encouraging companies to go and stay public. Atkins has characterized the existing Regulation S-K framework, and Item 402's executive compensation rules in particular, as "lengthy and complex, driven in part by piecemeal additions over the last two decades without a holistic review of how everything fits together." That diagnosis is driving an ambitious rulemaking agenda that touches virtually every dimension of the public company reporting regime.

The SEC recently released its highly anticipated proposed rules allowing public companies to shift from quarterly to semiannual reporting. If adopted, this proposed change would represent the most significant change to the U.S. periodic reporting regime since quarterly filings became mandatory more than 50 years ago.

On executive compensation, the SEC is expected to propose revisions to Item 402 of Regulation S-K in the coming months. Anticipated changes include reducing the number of named executive officers whose pay must be disclosed—potentially from five to three—and introducing tiered disclosure requirements scaled to company size and maturity. The SEC is also expected to raise the materiality threshold for reporting perquisites, potentially reclassify executive security costs so they no longer constitute disclosable perquisites and simplify its own rules governing CEO pay ratio, pay-for-performance, and clawback disclosures.

On shareholder proposals, the SEC's revised approach to Rule 14a-8 adopted in Fall 2025 has altered the process for excluding proposals, giving companies more agency over the proposals presented in their proxy statements (with related risk in exercising that agency).

More broadly, the SEC's "Rationalization of Disclosure Practices" initiative contemplates rule amendments designed to "rationalize disclosure practices to facilitate material disclosure by companies and shareholders' access to that information."

Taken together, these initiatives constitute a fundamental recalibration of the regulatory framework governing public company disclosures. The direction is clear: less mandated disclosure, fewer prescriptive requirements, and greater company discretion over the scope, detail, and format of public reporting.

Possible Investor Responses

Of course, a reduction in mandatory disclosures will not reduce the accountability expectations of many institutional and activist shareholders. As the regulatory channels for investor engagement narrow, shareholders are redirecting their efforts through alternative mechanisms—some of which may pose more and different risks than traditional approaches.

Board-Level Accountability Campaigns. The most direct form of investor pushback is a campaign to hold individual directors personally accountable for governance decisions shareholders oppose. ISS recently recommended votes against the governance committee chair of Alexandria Real Estate Equities after the company excluded an advisory independent chair shareholder proposal on "micromanagement" grounds, as well as false and misleading statements (which the company did not identify). ISS noted that independent chair proposals are common governance proposals long considered an appropriate subject for Rule 14a-8 submissions, and that the company did not provide a clear and compelling argument supporting a reasonable basis for exclusion of the proposal.

Directors may be targeted for "vote no" campaigns due to other anticipated SEC reforms as well. For example, if the SEC's planned executive compensation reforms dramatically curtail required pay disclosures, activists (and others, including proxy advisors) may express their dissatisfaction and force engagement by shifting from negative say-on-pay votes to voting against (or recommending against) the election of compensation committee chairs.

Escalating engagement to the board level—and the ballot box—has proven a successful engagement strategy for investors in other circumstances. Companies should prepare for investors and others to use this strategy to address the vacuum left if disclosure requirements decrease.

Shareholder Litigation. Reduced mandatory disclosure creates litigation risk as well as governance risk. Where companies that shift to semiannual reporting elect to provide voluntary quarterly updates beyond what is customarily disclosed today in earnings releases, those disclosures will be subject to the antifraud provisions of the federal securities laws without the structure and guidance afforded by Form 10-Q's requirements. This gap could result in a rise in inaccurate or incomplete disclosures due to a lack of prescriptive requirements, which would invite shareholder litigation challenging the sufficiency and accuracy of both voluntary and mandatory disclosures. In addition, this could result in inconsistent or confusing disclosures across industries and peers, creating new litigation exposure. While all of this may sort itself out over time as private ordering and precedent develop, companies should weigh the opportunity to reduce their regulatory obligations with the related implications, including more scrutiny from the plaintiffs' bar.

End-Running Rule 14a-8. The SEC's revised approach to Rule 14a-8 shareholder proposals makes it easier for companies to exclude proposals from their proxy statements, but some exclusions have escalated the conversation instead of ending it. To date, six shareholders have filed lawsuits challenging exclusions, and half of the targeted companies have quickly settled to avoid further litigation.

While litigation has been the most common way to challenge exclusions, it is not the only available approach. As noted above, ISS recently recommended votes against a governance committee chair for the company's exclusion of a governance proposal. Further, in response to BJ's Wholesale Club's recent exclusion of its proposal relating to GHG emissions, Trillium Asset Management threatened to submit proposals through the mechanisms available under the company's bylaws—which would require Trillium to prepare its own materials and solicit proxies in support of its proposals. These "zero slate" proposals are an attractive tool for investors not only because they end-run the Rule 14a-8 machinery but also avoid the rule's express limitations, including its "one proposal per person" rule and 500-word limitation. Zero slate proposals have been used in years past with some success, and have already made an appearance in the 2026 proxy season: In March, the Communications Workers of America notified Nexstar Media Group of its intention to submit five governance proposals using this strategy, although it has not filed proxy materials to date.

Companies should consider these alternate channels to the Rule 14a-8 process and the likelihood of their use, as well as other possible escalation tactics, when evaluating how to address an incoming shareholder proposal under the SEC's revised process.

Practical Recommendations for Public Companies

A deregulatory environment does not diminish the need for proactive governance; it intensifies it. Companies that reduce disclosures without a parallel strategy for sustained investor engagement are likely to find themselves on the receiving end of alternative pressure tactics. This proactive and deliberate engagement is made even more imperative in light of the rise of voter choice programs at the largest institutional investors, including BlackRock, Vanguard, and State Street. How can companies best manage the transition to the new disclosure environment, while navigating investor reactions? A few recommendations follow.

Disclosure Practices. As regulatory mandates are relaxed, companies should take into account a range of factors—including industry norms, peer group practices, investor expectations, litigation risk profile, and company size and maturity—to determine what their disclosure practices should be. Similarly, companies that choose to comply only with the required disclosure requirements should carefully assess whether to supplement their filings with voluntary disclosures.

We expect disclosure practices will differ from company to company, and may depend on the company's peer group, industry, or life-cycle stage. For example, the shift to semiannual reporting will not eliminate investor demand for quarterly financial information; notably, many UK and EU companies continue to report quarterly on a voluntary basis without a regulatory requirement. Moreover, companies that report semiannually, without supplemental disclosures, may face diminished analyst coverage, reduced valuations, and heightened litigation exposure, including under Regulation FD and insider trading laws.

Executive Compensation. Boards should prepare for executive compensation to become a flashpoint for activist engagement regardless of the regulatory framework. If the SEC reduces the granularity of mandated pay disclosures, activists will not abandon compensation issues—they will continue to pursue them through say-on-pay votes, director "withhold vote" campaigns, direct board engagement and shareholder proposals. Compensation committees should continue to evaluate their pay programs for defensibility on the merits and determine whether shareholders have sufficient context to evaluate executive pay decisions, even if the regulatory floor is lowered.

Engagement. Companies should implement a shareholder engagement strategy that addresses governance expectations directly, with an eye toward varying investor policies that may be in place at even a single institutional investor. Identifying the investor's key decisionmakers with respect to the company's voting securities and regular, substantive engagement with those individuals is an important defense against escalation. Companies should also strive to correct information in the proxy advisors' databases, as inaccurate information can be difficult to correct once disseminated.

Litigation Risk. Companies should carefully evaluate litigation risk arising from changes to their disclosure and governance practices. The transition from mandated to voluntary disclosure in any area—whether periodic reporting, executive compensation, or otherwise—requires careful attention to antifraud exposure; Regulation FD compliance; appropriate consideration of insider trading risks; charter, bylaw, and corporate governance documents; contractual reporting obligations, including those relating to indebtedness; and the sufficiency of the company's disclosure and internal controls over financial reporting. Other changes, including the possible rescission of Rule 14a-8, may drive other changes to governance documents and frameworks, including bylaw provisions governing submission of shareholder proposals.

Monitoring. As the shareholder proposal landscape continues to change, management teams and boards should continue to monitor developments, including possible implications and reactions in the event Rule 14a-8 is rescinded or significantly restricted.