In recent years, activist investors — often holding minimal financial stakes — have increasingly used the proxy process to promote public policy agendas unrelated to company performance. This shift has transformed proxy statements into battlegrounds for contentious social debates, drawing companies away from their strategic priorities and undermining the intended function of shareholder engagement. At the same time, businesses face a regulatory process at the Securities and Exchange Commission (SEC) that has become inconsistent, opaque and unpredictable — raising compliance costs and exposing public companies to new risks, ultimately harming Main Street investors and weakening confidence in U.S. capital markets. 

The white paper also examines the growing influence of proxy advisory firms, which wield significant power over corporate governance decisions while operating with minimal regulatory oversight. Despite their outsized impact on vote outcomes, these firms — together forming a foreign-owned duopoly — remain largely unaccountable for conflicts of interest, factual errors, and one-size-fits-all recommendations that often ignore company-specific circumstances and lack any underlying economic analysis. In doing so, they undermine the discretion of independent boards with fiduciary duties to shareholders and effectively disenfranchise investors by imposing de facto supermajority requirements on certain matters.

In “The Need for Bold Proxy Process Reforms,” Business Roundtable puts forward a set of targeted policy recommendations, including:

• Restoring Rule 14a-8 to its original intent by precluding shareholder proposals that advance broad ideological agendas.
• Preventing the abuse of proxy rules through strengthened submission and resubmission thresholds for shareholder proposals.
• Reining in the outsized influence of proxy advisory firms by prohibiting “robovoting” (the practice of mechanically voting in line with proxy advisor recommendations), requiring vote recommendations to be supported by economic analysis and addressing conflicts of interest.
• Affirming the SEC’s authority to regulate proxy advisory firms and enforce standards for transparency and accountability.

Business Roundtable urges both Congress and the SEC to act swiftly. While the SEC’s recent rescission of Staff Legal Bulletin No. 14L represents a step toward restoring balance, the current system remains deeply flawed. Broader structural reform is necessary to protect investors and ensure that the U.S. capital markets continue to serve as a driver of economic opportunity and growth.