Public companies are revisiting their disclosures to keep up with recent EOs and SEC developments this proxy season.
Topics discussed:
- Public company disclosure challenges in response to certain EOs
- The SEC’s approach to its climate disclosure rules
- New SEC guidance on shareholder proposals and the implications of shareholder engagement
- The SEC’s interpretive position of the filing of soliciting material by shareholder proponents
listent to audio here.
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Transcript
The following transcript of this discussion was edited for clarity.
Dave Lynn: Hello, this is Dave Lynn. I’m a partner in Goodwin’s Capital Markets practice and chair of the firm’s Public Company Advisory Practice. This is New Directions, a series of discussions about the impact and trajectory of the second Trump administration as we approach its 100-day mark.
In this discussion today, we’ll focus on some of the recent developments that we’ve observed that impact SEC (Securities and Exchange Commission) disclosure as well as proxy matters for public companies.
I’m very pleased to be joined today by my colleagues Danielle Reyes and Lauren Visek. I will turn it over to Lauren first to talk about some of the disclosure practices we’ve observed during this annual reporting season.
Lauren Visek: In January, President Trump signed an executive order (EO) titled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” which relates to the termination of diversity, equity, and inclusion (DEI) preferences and policies in government agencies while encouraging similar measures in the private sector. This and other anti-DEI measures by the Trump administration resulted in companies taking another look at their disclosures.
The first place we saw some companies reexamining their disclosures was in their Form 10-K filings. When we looked at what other companies had done, we noted that some of them just sort of tweaked the language, some eliminated references to diversity, and others removed all voluntary disclosure related to diversity, equity, and inclusion programs. In an informal review of about 100 Form 10-K filings, approximately 81% of companies deleted or significantly reduced disclosures related to DEI or changed the nomenclature.
Proxy statements are the next area in the disclosure season that saw some changes. Companies similarly addressed diversity in their proxy statement disclosures. For required diversity disclosures under Item 407, regarding how the nominating committee considers diversity, companies have carefully revisited the language and, in some cases, brought in the language to describe the type of diversity considered.
Again, in an informal survey, approximately 86% of companies deleted or significantly reduced references to DEI or changed the nomenclature in their proxy statement filings for 2025 when compared to 2024. Companies are also reexamining their diversity initiatives, including employee resource groups (ERGs).
The Nasdaq Board Diversity Matrix requirement is the next place that saw changes related to diversity disclosure. On December 11, 2024, the United States Court of Appeals for the Fifth Circuit vacated the SEC’s order related to the rule that required companies listed on Nasdaq to include a diversity matrix related to the board characteristics.
Many companies chose to replace the Nasdaq matrix with diversity information in narrative form or completely remove it. We saw Institutional Shareholder Services (ISS) modify their policies to no longer consider diversity of the board in their voting recommendations. Glass Lewis seems to continue to consider board diversity in its recommendations. BlackRock, Vanguard, and State Street have limited language related to diversity in their voting policies.
Careful consideration of a company’s shareholder base and other client-specific factors would inform the decision on whether to remove, replace, or retain related disclosures.
I’ll now turn it over to Danielle to talk about some of the changes we saw related to climate change.
Danielle Reyes: Thank you so much, Lauren. And thanks, Dave, for the introduction.
Hello, everyone. I’m Danielle Reyes, and I co-chair Goodwin’s ESG & Impact group. I’m going to comment on changes to disclosures related to climate issues.
Final rules requiring public companies to make climate-related financial disclosures were adopted by the SEC in March 2024 but were immediately subject to litigation challenging the rules.
In April 2024, the SEC stayed the implementation of the rules.
In March 2025, the SEC voted to end its defense of the climate disclosure requirements in court, and commission staff are no longer authorized to advance arguments in the case. The litigation technically has not been terminated, and, in theory, the case could be continued by several interveners that have joined the case as parties. But even if that occurs, the likelihood of the SEC enforcing the climate disclosure rule is very low.
On the state level, starting in 2026, certain similar requirements apply to both public and private companies doing business in California that meet certain revenue thresholds. A handful of other states, including New York, are considering near-identical legislation.
Like the SEC rules, the California rules are subject to litigation, which has so far been unsuccessful, and they may also be challenged at the federal level pursuant to a recently released presidential executive order titled “Protecting American Energy From State Overreach.” We’ll have to follow that development and see where it goes.
In the past, many companies included voluntary disclosures on efforts related to climate change in their proxy statements. Some companies have revisited that language — but certainly to a lesser degree at this point than DEI-related disclosures.
Looking ahead, we are starting to see similar changes in sustainability reports as well.
Now I’ll turn it back to Dave.
Dave Lynn: Thank you, Danielle. I’ll mention a few areas in which the SEC has provided additional guidance regarding shareholder proposals and shareholder engagement that are in place for the current proxy season. These are situations in which the SEC staff has either revisited prior interpretations or provided new interpretations through a variety of measures.
First, in February 2025, the SEC’s Division of Corporation Finance published a new staff legal bulletin titled “Shareholder Proposals: Staff Legal Bulletin No. 14M (CF).” This bulletin addresses various aspects of Rule 14a-8, which is the rule that permits shareholders to submit proposals to be included in a company’s proxy statement unless that proposal can be excluded under substantive bases for exclusion or the proponent hasn’t met the eligibility and other criteria.
At its core, this staff legal bulletin was primarily intended to revisit a prior staff legal bulletin, which was titled “Shareholder Proposals: Staff Legal Bulletin No. 14L (CF),” and the interpretations that were provided for two principal substantive bases for excluding shareholder proposals for Rule 14a-8(i)(5) and Rule 14a-8(i)(7).
In the latest interpretation, the SEC staff said they would basically consider arguments regarding the exclusion of a proposal on a case-by-case basis, looking at the particular facts and circumstances raised with respect to any shareholder proposal that identifies a significant policy issue; focusing — in particular in the case of Rule 14a-8(i)(5) — on the economic relevance of the proposal to the company’s business circumstances; and focusing with respect to Rule 14a-8(i)(7) on how the proposal relates to the company’s business.
One interesting thing to note about this guidance: In the past, the SEC typically issued this guidance around October or November of the year prior to the proxy season. But this guidance was put out in February of this year and was applied to the current proxy season in which companies had already made arguments to exclude shareholder proposals under these substantive bases.
Thus far, we’ve observed that there has been an increase in the number of proposals that have been withdrawn that were subject to no-action requests because of the change in the SEC staff’s position, which many folks said makes it easier for companies to argue for exclusion of proposals, particularly in the case of environmental and social proposals that often are challenged under Rule 14a-8(i)(5) and Rule 14a-8(i)(7).
The other area in which the SEC staff has provided interpretive guidance is relevant to engagement with shareholders. This was also SEC staff interpretive advice that came out in February 2025.
The SEC staff put out some interpretive guidance that basically addressed the ability of institutional investors to report their beneficial ownership of a company’s securities on Schedule 13G versus Schedule 13D. The primary difference there is that on Schedule 13D, someone would report when they have the purpose or effect of changing or influencing the control of the issuer, whereas Schedule 13G represents a more passive ownership of the securities.
In its guidance, the SEC staff said that companies could have situations that indicate, by virtue of the engagement of a shareholder with the company, that the shareholder actually has a purpose, intent, or effect of changing or influencing the control of the issuer. In evaluating this, the subject matter of the engagement is important. Particularly, the SEC staff noted that in certain situations and topics in which the shareholder is essentially focused on making a change to the company’s policies or the board through the engagement practices, Schedule 13D would not be available, making Schedule 13G necessary.
On the part of institutional investors, I think this has created some concern that they needed to revisit their engagement activities, particularly if they were talking to shareholders about voting against a director or supporting a shareholder proposal seeking the company to implement a certain policy. Those kinds of things became much more difficult through the lens of these interpretations because, generally, those types of institutions would prefer to continue reporting on Schedule 13G.
So, we saw major institutional investors such as BlackRock and Vanguard essentially suspend their engagement for a period of time in February and March until they were able to put out guidance internally and externally that made it clear that the purpose of their engagement was not to influence or change anything with respect to an issuer.
Finally, in January of this year, the SEC staff put out guidance on the ability of shareholder proponents to utilize an SEC rule that permits them to file a Notice of Exempt Solicitation on EDGAR (the SEC’s Electronic Data Gathering, Analysis, and Retrieval system). This practice had been criticized over time because, in some cases, people believe that shareholders were using the Notice of Exempt Solicitation rule to sort of actively publish their positions around shareholder proposals when they weren’t in fact making the exempt solicitations available.
The SEC determined that guidance was appropriate in this context and basically imposed additional conditions that would try to address some of those concerns I just mentioned about utilizing the company’s EDGAR feed to include information from the shareholder proponents. Overall, these are the fairly significant changes that we’ve seen playing out — and will continue to play out — over the course of the 2025 proxy season.
That was everything we wanted to cover today. I really encourage you to check out our many other discussions in our New Directions series for more insights on evolving policies. Thank you very much for listening.
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