Shareholder Primacy – Kyle Pinder on Shareholder Proposals under Delaware Law

Podcast: Shareholder Primacy
Episode: Kyle Pinder on Shareholder Proposals under Delaware Law
Date: November 19, 2025
Host: Mike Levin
Guest: Kyle Pinder, Partner, Morris Nichols, Wilmington, Delaware

Episode Overview

This episode features a deep dive into the legal status of shareholder precatory proposals under Delaware law, guided by guest Kyle Pinder. Pinder, an attorney and recent author of a widely cited paper, discusses his findings following SEC Chair Paul Atkins' public comments, the silence of Delaware statutes on the matter, and the broader implications for corporate governance and future regulation. Host Mike Levin navigates the conversation, highlighting issues around board and shareholder rights, looming federal reforms, and how private ordering may fill governance gaps.

Key Discussion Points & Insights

1. Introduction and Context

• Ann Lipton is away; Mike Levin hosts solo and welcomes Kyle Pinder.
• Pinder received prominent recognition from SEC Chair Paul Atkins regarding his paper on Delaware law and shareholder proposals.
• The paper’s title: Non Binding Reframing Precatory Stockholder Proposals under Delaware Law.

2. Defining Precatory Proposals

• Precatory proposals: Non-binding resolutions by shareholders requesting or recommending board action.
  • Examples: “Prepare a report on climate risk”, “Make efforts to diversify workforce”, “Amend bylaws in a particular way”.
• Governance vs. social/environmental proposals are distinguished.
• (04:24) Quote

  "A precatory stockholder proposal is a resolution the stockholder would raise at a meeting and effectively make a request or a recommendation to the board." – Kyle Pinder

3. Delaware Law’s Silence on Precatory Proposals

• Delaware General Corporation Law (DGCL) is silent about non-binding/precatory proposals (03:02).

  • Section 211(b): Broadly grants annual meetings authority to transact “other proper business,” but lacks specifics.
  • Section 141(a): Vests the board with authority to manage company business and affairs; this board-centric regime “fills in the gaps” where the law is silent (07:10).

• Delaware’s approach favors director primacy over shareholder primacy.

• (07:59) Quote

  "A board centric governance regime would suggest that in the absence of express delineation of authority, that authority rests with the board." – Kyle Pinder

4. Shareholder Fundamental Rights under Delaware Law

• Three core rights:
  • Vote (especially in director elections and on matters required by law)
  • Sell shares (“Wall street walk”)
  • Sue (for breach of fiduciary duty, etc.)
• Rights to nominate directors or propose bylaw amendments flow from (“subsidiary to”) voting rights (12:08).

5. What Can Shareholders Vote On?

• Delaware courts recognize shareholder votes only in three principal categories (16:31):

  • Director elections
  • Matters committed to shareholders’ vote by law or governing documents (e.g., DGCL, federal rules like say-on-pay)
  • Matters the board chooses to submit for shareholder approval (auditor ratification, etc.)

• Precatory proposals, absent board approval, do not fit these categories: “You can't raise it over the board's objection.” (18:28)

• (19:01) Quote

  "If a shareholder will go to Chancery Court ... Chancery would have almost nothing to work with. There's no statute to refer to and very little case law. But there's no inherent right..." – Mike Levin

6. Practical and Policy Arguments

• Supporters of shareholder proposals cite accountability and shareholder communication.
• Accountability: Precatory proposals are largely ineffective (21:10)

  "As accountability measures go, it's pretty weak." – Mike Levin

• Communication: Many new tools (universal proxy, withhold campaigns, exempt solicitations, social media) make Rule 14a-8 less essential.
  • (21:50) Quote

  "It's just not the most efficient or effective means of communication anymore." – Kyle Pinder

7. Federal vs. State Law – Clarifying the Distinction

• Pinder’s paper is about meeting agendas under state law—not directly about proxy materials, which are governed by federal law (Rule 14a-8).
• The federal regime affects proxy disclosures but doesn’t create state-law rights for proposal inclusion (23:16).

8. Paper’s Origin and Significance

• The idea came amid speculation the SEC might drastically reform or repeal Rule 14a-8 (27:08).

• If the federal regime is reformed or repealed, gaps may be filled by state law or private ordering (charter/bylaw changes).

• (29:31) Quote

  "No matter what flavor of reform the SEC pursues, there will be gaps that either state law or issuers are going to need to, or may perhaps want to fill or at least understand." – Kyle Pinder

9. Private Ordering and Bylaws

• Companies can use charters to define or restrict proposal rights, but amendments require shareholder approval.
• Bylaws are more flexible and can be changed unilaterally by boards or shareholders.
  • Unclear if bylaws can restrict non-mandated precatory proposals without violating Delaware law (32:30).
  • Risk: Any new bylaw may face litigation, as the law is not settled and there could be backlash.
  • Ideal: Delaware Legislature could clarify and authorize proposal regulation by bylaw (34:08).

10. Paper's Reception & Potential Implications

• The paper gained attention after being cited by SEC Chair Atkins at the Weinberg Center—Pinder was present and found the experience “flattering and humbling” (34:47).
• In-house and public company lawyers see the piece as a guide but are cautious of litigation risk and investor backlash (37:55).
• Not likely to trigger mass exclusion of all proposals, especially on governance topics (38:28).
• Most environmental/social proposals already face exclusion under “ordinary business” (Rule 14a-8(i)(7))—the significant policy exception is difficult to parse (40:19).
• Delaware courts retain board-centric bias, unless the Legislature or courts shift toward shareholder primacy (42:17).

11. Notable Quotes and Memorable Moments

• (21:10) Mike Levin: “As accountability measures go, it's pretty weak.”
• (34:47) Mike Levin: “So you were at the dinner where ... the chairman of the SEC is talking about your paper?”
• (35:18) Kyle Pinder: “First you have to start with state law and Then go to 14a-8. 14a-8 wasn’t meant to give just a broad referendum right on environmental and social proposals.”
• (43:10) Kyle Pinder: “Our main role is advisory and counseling… I help out with public company M&A… but you won’t see me in court.”

Important Timestamps

• 03:02 – Delaware law’s silence on precatory proposals
• 04:24 – What is a precatory proposal?
• 07:10 – Section 141 and board authority
• 12:08 – Subsidiary rights and right to nominate directors, propose bylaw amendments
• 16:31 – Three categories of shareholder vote rights
• 18:28–19:01 – Board discretion and lack of shareholder recourse
• 21:10/21:50 – Policy arguments: accountability and communication
• 23:16 – Federal-State law distinction
• 27:08/29:31 – SEC rulemaking, origins of Pinder’s research
• 32:30 – Bylaws, charters, and regulation of proposals
• 34:47 – SEC Chair Atkins references Pinder’s paper
• 37:55/38:28 – Prospects and risks for issuers considering exclusion of proposals
• 40:19 – Use of “ordinary business” exclusion for ESG proposals
• 42:17 – Shareholder vs. board-centric tension

Tone and Style

• Conversational, reflective, and occasionally wry—especially when discussing Delaware corporate law’s nuances.
• Pinder is precise and careful, acknowledging practical lawyering concerns (litigation risk, institutional inertia).
• Levin pushes for real-world implications, shares the activist investor’s perspective.

Summary

This episode is an in-depth, practitioner-focused conversation about how Delaware law frames (or fails to frame) the rights of shareholders to make precatory (non-binding) proposals, particularly if federal law changes in the near future. Pinder’s research reveals Delaware’s statutes and case law are largely silent, and prevailing culture remains board-centric. If the SEC scales back or eliminates federal access, the void may be filled by company-specific charters and bylaws—although such moves are fraught with legal risk and reputational implications.

The paper is already shaping dialogue among companies, investors, and regulators. Its central insight: Absent explicit legal authorization, boards have broad discretion—and precatory proposals, unless approved by the board or required elsewhere, are not inherently protected rights under Delaware law. This state law ambiguity foreshadows new battles in governance as federal and state rules continue to evolve.