The shareholder proposal rule goes into effect today, barring any further announcement from the Securities and Exchange Commission to amend its effective date. The lesser known rule was finalized together with the controversial proxy access rule back in April of this year.

In an earlier statement from the SEC where it confirmed it would not be seeking a rehearing on the snubbed proxy access rule, the Commission announced a stay order that would provide that “the stay of the effective date of the amendments to Rule 14a-8 [the shareholder proposal rule] and related rules will expire without further Commission action when the court's decision is finalized, which is expected to be September 13.” As of yesterday, the SEC had released no further details.

The rule will pave the way for shareholders to campaign for changes in companies, unless those proposals violate state laws, seek changes in management functions, or relate to elections. Any proposals on those issues can be disqualified from inclusion to the proxy materials.

Under the shareholder proposal rule, companies have a say on whether to include any of the suggested proposals by shareholders or otherwise. If they choose to include shareholder proposals, they will have to place the proposals on their proxy cards and allow all shareholders to vote on those suggestions during the proxy season.

Should any company decide to reject any of the shareholder proposals, the company will have to submit in writing to the SEC why they refused to accept the proposal in question unless the proposals submitted by shareholders did not comply with the guidelines as outlined in the rule. In this case, companies can return the proposals to shareholders within 14 days of receiving the submission and allow shareholders 14 days to re-submit their proposals for consideration.

Guidelines for proposal submissions include:

One proposal per shareholder

The 500 word limit: Submissions cannot exceed 500 words in length, including arguments, title, and heading

Proposals must be received at least 120 days prior to scheduled annual meetings

Proposals must be received at principal's executive office

Shareholders or their qualified representatives must be present during the annual meetings to present their proposals

A proposal that seeks to redress a personal claim or grievance against the company or personnel is prohibited