25 Sep PUBLIC PENSION CORNER #58: Regulatory Reform and Shareholder Proposals: A Balancing Act
NEWS:
I. State AGs Ask SEC to Investigate Credit Rating Agencies
Republican state attorneys general – led by Montana AG Austin Knudsen – have sent a letter asking the Securities and Exchange Commission (SEC) to investigate the credit rating agencies – Moody’s Fitch, and S&P – for their ongoing use of ESG metrics that can harm energy companies and government entities that rely on energy revenues:
The letter, first obtained by the DCNF, follows an earlier effort by 23 state attorneys general demanding the three agencies explain allegedly ESG-driven rating decisions. Republican Louisiana Attorney General Liz Murrill’s office said at the time that the coalition was questioning whether the agencies’ ESG policies complied with federal law….
The latest letter focuses heavily on an August report from Moody’s examining how heat and water stress could affect businesses and financial institutions. The attorneys general argue Moody’s continued relying on RCP 8.5, short for Representative Concentration Pathway 8.5, a high-emissions climate scenario used to model potential future warming — even after researchers described that pathway as implausible under current emissions and energy trends….
Credit ratings should reflect financial reality, not an ESG agenda,” Jason Isaac, CEO of the American Energy Institute, told the DCNF. “When rating agencies rely on implausible climate scenarios and retracted studies to influence credit decisions, they undermine the integrity of the ratings investors depend on and can drive up the cost of capital for American energy producers.”
II. Glass Lewis to Merge with Clarity AI
Glass Lewis, the second-largest proxy advisory service in the world, is merging with Clarity AI, a European-focused ESG data firm. The move suggests both that Glass Lewis is openly embracing an ESG-centric approach and that it will turn its attention toward Europe, where ESG is much more significant investment segment.
The deal, which closed on Wednesday, was completed as an all-share swap via a newly created holding company, according to a statement. The geographic focus of Clarity AI, which lists Banco Santander SA, ING Groep NV and BNP Paribas SA among clients, will be “complementary” to the markets already covered by Glass Lewis, Chief Executive Officer Bob Mann said in an interview.
The companies declined to provide financial details of the deal. The proxy adviser’s majority owner, Canada’s Peloton Capital Management, will remain as the combined company’s dominant shareholder, Glass Lewis said.
Integrating Clarity AI’s ESG data-analysis platform with Glass Lewis’s advisory and stewardship services will provide an opportunity to “reframe the proxy voting industry,” Mann said. That’s as the political environment in the US complicates efforts around proxy voting.
COMMENTARY
By Stephen R. Soukup, President and Publisher, The Political Forum
“Regulatory Reform and Shareholder Proposals: A Balancing Act”
The Securities and Exchange Commission has proposed rescinding Rule 14a-8 of the Securities Exchange Act, which is the heart of shareholder proposals and the informal system of shareholder engagement that has evolved over the last eighty years.
Yesterday, Stefan Padfield, a principal at the Heritage Foundation’s American Investor Initiative (where I am a visiting fellow), was the guest presenter at the monthly webinar hosted by the State Financial Officers Foundation’s Public Fiduciary Network (which I co-host and where I am the scholar in residence). He discussed the SEC’s proposed rescission and how shareholders might continue to engage with corporations in a post-14a-8 world. As expected, Stefan was fantastic. If you have any interest at all in this topic and its significance, I urge you to look for the soon-to-be-launched SFOF/PFN channel on YouTube, where webinar recordings will be posted. It is well worth your time.
As some of you may know – given that I have mentioned it before – I have a new book coming out early next year from Encounter Books. The follow-up to 2021’s The Dictatorship of Woke Capital, the new tome – The Dictatorship of Big Capital – addresses the risks posed to American business and capital markets from the concentration of capital and the power it brings. Mostly, it’s an argument that the history of American markets over the last century can be characterized as a recurring cycle: business and government attempt to address the concentration of capital, spreading “shareholder democracy” by expanding access to markets and investments, which creates diffuse ownership with little shareholder power and a host of related problems, which, in turn, prompts government action that purports to address the issue but, nevertheless, exacerbates the concentration of capital and power. Lather, rinse, repeat.
What Robert Nisbet and Russell Kirk called the “pulverizing and macadamizing tendency” of modern history applies not just to politics and society, but to business and markets as well.
What follows here is an essay/commentary I wrote almost a month ago, when the SEC’s plans to eliminate 14a-8 were made clear. It expresses my concerns with the move and its possible impact on markets, specifically through the lens of the concentration of capital. Note here that this is my own view, not one that should be associated with any of the organizations I work with and for. I don’t think any of them would object to it, in principle, but they are working (with my input) on formulating their own responses.
In the meantime, my thoughts on the rescission of 14a-8:
Securities and Exchange Commission (SEC) Chairman Paul Atkins appears to be one of the very few major financial players to recognize that the last half-century of American financial and commercial consolidation carries significant risks. While the average investor’s returns over this period have generally been outstanding, even unprecedented, the centralization of power in a vanishingly few pairs of hands over that same period of time threatens not just those returns but the stability of the financial system more broadly.
In his relatively brief tenure as chairman, Atkins has already undertaken several projects intended to decentralize market influence and to restore power to those who should rightfully wield it, shareholders. First and most obviously, under his direction, the SEC has worked to roll back the gains made under the previous administration supporting ESG – Environmental, Social, and Governance – an investment and management strategy that largely serves the interests of the biggest players in the industry: the massive passive asset managers, the proxy advisory duopoly (ISS and Glass Lewis), and the federal government itself. Among other things, under Atkins, the Commission stopped its legal defense of previous Chairman Gary Gensler’s climate emissions reporting rule and, more recently, has started working to rescind the rule altogether. He and the Commission also recently sued ISS, by far the largest proxy advisory service in the world, accusing it of withholding subpoenaed records.
Atkins has noticed and done his best to rectify what is known in financial circles as “the listing gap.” Research has shown that the number of U.S. exchange-listed firms peaked in 1996 at 8,025 companies (30 listings per million inhabitants) but has fallen sharply ever since. In 2012, the number was 4,102 companies (at a mere 13 listings per million inhabitants). In 2023, when the numbers were updated, the research showed that “the US has about half as many listed firms per capita as other developed countries.”
Atkins has explicitly framed reversing the U.S. listing decline as a signature priority, branding the effort “Make IPOs Great Again.” In a December 2, 2025, keynote at the NYSE (“Revitalizing America’s Markets at 250”), he cited the same data noted above and proposed an agenda for reversing the “listing gap” by enabling disclosure reform, de-politicization of shareholder meetings, and litigation reform. In the summer of 2026, his SEC took several concrete steps toward making the agenda a reality, including filing two new rules designed to cut IPO barriers and expand shelf registration access for smaller public companies.
On August 28, 2026, Chairman Atkins took yet another step in his plan to decentralize finance and restore the balance of power in capital markets. He tacitly announced his plans to rescind “14a-8,” the shareholder proposal rule promulgated by the SEC in 1942, as part of its role in enforcing Section 14(a) of the Securities Exchange Act of 1934. This rule sets the conditions under which a publicly traded corporation must include a shareholder proposal on its proxy ballot, as well as the specific grounds on which a proposal may be excluded. For much of the last decade, 14a-8 has been the heart of shareholder activism, providing the means by which activists can push their non-pecuniary entreaties and political agendas on corporations, forcing them, at the very least, to be confronted by previously rare environmental and social demands. Over the past couple of years, it has become the primary means by which opponents of ESG and other politicization efforts have endeavored to push back and to encourage corporations to get “back to neutral.” These groups are often called “anti-ESG” or “conservative” by establishment media and proxy advisors, specifically to undermine them and stifle support for their shareholder proposals. Even so, almost all of these groups push a good governance agenda to drive shareholder value, a goal that inarguably aligns with the SEC’s mission.
When Chairman Atkins speaks about “depoliticizing” shareholder proxy ballots and meetings, he’s speaking specifically about 14a-8 and its abuse by those activists who wish to use capital markets to achieve what they have been unable to achieve at the ballot box. He wants to get political activism out of the shareholder proxy process. Additionally, the SEC has framed the rescission of 14a-8 as a nod to federalism (shareholder proposals will be adjudicated under state law) and a blow against regulatory overreach. Atkins has said that he believes the rule, as promulgated by his predecessors more than eight decades ago, is beyond the scope of the authority apportioned to the SEC by the 1934 Act.
This makes a great deal of sense, and it does, indeed, decentralize and deregulate the shareholder proposal process, in keeping with Chairman Atkins’ broader mission.
At the same time, however, it also demonstrates how complicated the intersection between markets and politics has become and how some ideas, even those undertaken with the purest and noblest intentions, can produce harmful unintended consequences. Financial centralization is problematic for the same reasons political centralization is: it places too much power in too few hands and enables too few people to make decisions that disproportionately affect the rest of us. The causes of both types of centralization are manifold, but ultimately, they create a perpetually destructive feedback loop, with centralization both being driven by and driving the demise of intermediary institutions. As Tocqueville noted, it was those intermediary institutions that distinguished early America from its European cousins; and as Russell Kirk and Robert Nisbet have consequently remarked, it’s the collapse of those institutions that has destroyed “community” in this country and enabled the rise of a brutally homogenizing centralized power.
Publicly traded companies are not the only intermediary institutions to have been hollowed out by centralization in American finance over the last fifty years. Community banks, independent consumer banks, savings and loans and thrifts, and independent active asset managers have also disappeared, victims of consolidation, economies of scale, and the dominance of passive investment. Although more people own equities today than at any other moment in American history, they have less power than ever before and are entirely at the mercy of the Big Banks, the Big Asset Managers, the Big Proxy Advisors, and Big Government.
In its practical application, 14a-8 has become one of those few remaining intervening institutions. Yes, it has been abused by those seeking political ends through financial means, and yes, it should be reformed to curtail that abuse. Nevertheless, it has also become one of the very few tools by which shareholders can make their voices heard by management. In an era in which “ownership without agency” characterizes most shareholders’ position, 14a-8 is one of the last remaining means by which agency can still be exercised.
Although the elimination of 14a-8 would, indeed, be a victory for federalism, it would also likely be a victory for those seeking to consolidate and centralize power in capital markets. Its probable net effect would be to transfer even more power away from small shareholders and to corporate managers and the biggest of the passive asset managers, those who have the power and leverage to affect corporate behavior through other means. It is worth noting in this context that the single largest “shareholder” victory of the ESG era was the now-infamous partial takeover of the ExxonMobil board of directors by the small hedge fund Engine No. 1. It is also worth noting that this “victory” – an inarguable politicization of markets and business – had nothing whatsoever to do with the proposals enabled by 14a-8. Finally, it’s important to remember that the victory could not have been achieved without the joint participation of the two largest public pension systems in the country – CalPERS and CalSTRS – and the three largest asset managers in the country – BlackRock, Vanguard, and State Street – all of whom took Engine No. 1’s side in the proxy fight.
In short, this type of action would still be available to the biggest players in the financial world, those who have the resources to mount and publicize this type of dissident-director campaign, even after the rescission of 14a-8. Smaller shareholders, by contrast, would be disenfranchised.
Paul Atkins has been the Chairman of the SEC for less than 18 months, but already he’s put together a remarkable record in opposition to financial centralization and the damage it does to individual shareholders. It would be a shame if that record were undone by the unintended consequences of an otherwise appealing reform. At the very least, it would undoubtedly serve shareholders’ interests and the interests of capital markets for the SEC to assess the potential consolidative effects of eliminating Rule 14a-8 before rescinding the rule. Additionally, the SEC could continue to address consolidation risks by other means, including, for example, increasing competition when it comes to proxy vote advising and making it easier for shareholders to delegate voting to a broader swath of advisors better able to represent the true interests of shareholders.
