Precatory Proposals: A Broad Shareholder Right Under Delaware Law

Do shareholders of Delaware corporations have any right to have their precatory proposals voted on at their general meeting? Or does the decision to call a vote belong entirely to the board? For more than eight decades, the federal proxy rules have required companies subject to those rules to include qualifying shareholder proposals in their proxy materials, enabling dispersed investors to communicate preferences, signal concerns, and influence corporate policy at relatively low cost. Precatory proposals nonbinding in character account for the overwhelming majority of proposals submitted each proxy season. 

The opportunity to have a proposal included in the company’s proxy materials is an extremely important tool for shareholder proposals. Most shareholders in public companies attend the general meeting not in person but by conferring proxies, and they do so by using the proxy cards that the company management sends using company resources. If shareholders had no right to have their proposals included in the company’s proxy materials, they would need to disseminate their own proxy cards and to cover the related expenses.

The federal proxy rules recognize several causes that warrant exclusion of a precatory proposal from the company card. The cause of exclusion to which companies appeal most frequently is the ‘ordinary business’ exclusion, which concerns proposals dealing with the company’s ordinary business operations. However, this cause of exclusion is vaguely formulated and has given leeway to significant litigation.

In a keynote address delivered in October 2025, the Chairman of the Securities and Exchange Commission hinted at another cause of exclusion available to boards: proposals that are not a proper subject for action by shareholders under the laws of the jurisdiction of the company’s organization. The Chairman publicly questioned whether Delaware law provides shareholders with a right to have their precatory proposals addressed by companies. The Chairman invoked a legal theory advanced in recent scholarship by Delaware attorney Kyle A Pinder. On this view, the absence of an explicit statutory authorization for precatory proposals means that the power to determine what appears on the meeting agenda belongs, by default, to the board under Section 141(a) of the Delaware General Corporation Law (DGCL), which contains a broad grant of authority to the board over the business and affairs of the corporation. If that theory is correct, a Delaware company could exclude any precatory proposal submitted by a shareholder on the ground that it is not a proper subject for stockholder action under state law. Under the theory, in fact, precatory proposals are merely permitted at the discretion of the board: if the board decides not to have a vote, that would be a valid exercise of board authority.

The practical stakes are considerable. Delaware remains home to more than two-thirds of the Fortune 500 companies, and hundreds of precatory proposals are submitted to Delaware companies each year, dealing with broad environmental and social issues related to the companies’ business as well as with governance issues.

I argue, against the emerging skeptical view, that Delaware law gives stockholders a broad right to have their precatory proposals voted on at the annual general meeting, provided that such proposals bear a reasonably conceivable relationship to the business and affairs of the corporation. Despite its broad grant of authority to the board, Delaware law also grants stockholders significant rights. Precisely because board authority is so wide, shareholders’ rights are especially important and should not be dismissed lightly. 

The DGCL does not explicitly confer on the stockholders any right to control the meeting agenda. Such lack of an explicit provision has been interpreted as meaning that the power to set the agenda falls entirely into the umbrella of Section 141(a) and its residual grant of authority to the board. Section 141(a), however, does not require that any limit on board power must be explicitly stated in plain words in the statute: its language is broad, but it does not mean that it should be read in a vacuum. Limits on board authority can be inferred from the text, if such limits are consistent with the architecture of corporate powers that the statute provides for. Much of corporate law is devoted to the agency problems that arise from the board’s duty to manage the corporation in the shareholders’ interests. It would be contradictory to give the board complete authority over the very single forum for shareholders’ collective voice. Section 141(a) should not be interpreted as giving the board the power to exercise total control over the agenda of the meeting of another corporate constituency with distinct interests such as the corporation’s shareholders. This is especially true when we are dealing with votes that would leave board discretion intact given the precatory nature of the proposals.

The power of having votes on their precatory proposals linked to the corporation’s business is instrumental to shareholders’ established rights to vote their shares and have an annual meeting with the broad ‘proper business’ scope acknowledged by Section 211 of the DGCL. Precatory proposals foster dialogue between the main corporate constituencies while respecting the authority of the board, with positive repercussions on the conduct of business and the deliberative processes that accompany it. Given that most shareholders vote by proxy and most votes are administered through electronic systems, the vast majority of proposals can be dealt with in minutes and without any significant disruption to the meeting. As a tool that allows for the exercise of established stockholders’ rights and that is convenient for the business of the corporation, the right to have precatory proposals submitted for a vote falls squarely into the scope of Section 121 of the DGCL, which grants shareholders implicit powers as long as they are instrumental to enumerated powers and convenient for the business of the corporation.

While Delaware law governs a shareholder’s right to have a precatory proposal voted on at a meeting, the federal proxy rules establish whether a shareholder in a company subject to the Securities Exchange Act has a right to have the proposal included in the company’s proxy materials. It can happen, therefore, that shareholders are entitled to have a vote on a proposal but they cannot avail themselves of the company’s proxy materials because of the other exclusions provided for under the proxy rules (most importantly, proposals dealing with ordinary business operations).

However, because precatory proposals leave board discretion entirely intact and because the costs of litigation over exclusion far exceed the minimal burden of including a proposal on the proxy card, the most rational course of action for the boards of Delaware companies will in many cases be to include the proposal and allow a vote. 

The author’s article is forthcoming in Volume 75.2 of the Cleveland State Law Review and is currently available here.

Salvatore Saltarelli is an attorney admitted in New York who previously practiced as an attorney and notary in Italy. He holds an LLM from New York University School of Law and a PhD and a law degree from Sapienza University of Rome.