A unanimous D.C. Circuit panel this morning invalidated Rule 14a-11 as “arbitrary and capricious”, ruling that the SEC had failed to consider the potential costs and other impacts of the rule. This outcome was fairly predictable given the composition of the panel that decided the case, but even so the scathing and dismissive tone of the opinion is remarkable. The panel essentially swallowed the Business Roundtable and Chamber of Commerce arguments hook, line and sinker, even to the point of second guessing which academic studies the Commission should have relied upon and which it should have disregarded.
Where do we go from here? Barring intervention from the Supreme Court, the decision sends the SEC back to square one: a dispiriting prospect, given that the subtext of the opinion is that this panel at least would have thrown out pretty much anything that the SEC might have put forth. It’s also hard to imagine the current Congress coming up with a statutory solution. This means that the initiative on this subject may be back with companies and shareholders, where it arguably should have been all along.