Back when the SEC announced it was functionally no longer going to weigh in on whether companies may legally exclude shareholder proposals, I made a prediction in a number of spaces – except embarrassingly, I can’t remember which ones. Possibly podcasts, webinars, conferences, I’m sure someone remembers.

Which was: Companies now are in a heads-I-win, tails-you-lose position. They can exclude proposals, regardless of their legal basis for doing so. They can be confident that the SEC – which is now hostile to proposals – will not sue to force their inclusion. Very few shareholders will have the resources to sue over an improperly excluded proposal, and if any shareholder bothers, the company can simply moot the action by voluntarily agreeing to include the proposal even before filing an answer to a complaint. There is no risk to the company in simply excluding proposals, and waiting to see who sues.

And – behold!

AT&T said it would exclude a proposal offered by a variety of NYC pension funds asking for the company to disclose its EEOC-1, i.e., a form AT&T is required to submit to the federal government regarding the racial and gender makeup of its workforce. AT&T claimed that such a disclosure falls under the ordinary business exclusion of Rule 14a-8.

So, NYC pension funds – a well-heeled group of investors – filed a lawsuit, arguing that their proposal was not subject to the ordinary business exclusion. If you guessed it only took eight days for AT&T to agree to include the proposal on its proxy rather than litigate – you were correct.

A similar situation just unfolded with Pepsico; within days of the filing of a complaint, Pepsico agreed to include a proposal rather than litigate its exclusion.

There remains, as far as I know, one other case along these lines; in that case, the defendant company, Axon, is litigating in response, but I suspect even if that goes on much longer, it will be an outlier. I suspect our future looks more like AT&T and Pepsico: wealthy investors will get their proposals included, either because companies voluntarily agree at the outset, or because they cave at the filing of a complaint; investors without those resources will be excluded. And note, this is not about the actual size of the investor’s stake; plenty of investors may have small stakes but resources to litigate, and that’s what will carry the day. If anything, this will make the proposal process more political, rather than less, because interest groups are more likely to have litigation infrastructure.

And another thing. In this week’s Shareholder Primacy podcast, Mike Levin and I talk about efforts to regulate proxy advisors at the state level. Here at Apple; here at Spotify; and here at YouTube.

I read with interest this FBI Most Wanted notice concerning a certain Joshua Link, who is accused of, well:

Joshua Robert Link is wanted for his alleged involvement in a fraud scheme between January of 2021 and December of 2023. Through his company, Agridime LLC, Link and his co-conspirators solicited cattle contracts from buyers throughout the United States. They told prospective buyers that Agridime would purchase cattle, care for and feed the cattle, have it processed, and sell the meat through Agridime’s distribution channels. Agridime offered investment returns from 15% to 32% to prospective cattle contract buyers. In reality, Agridime purchased only a fraction of the cattle. The scheme resulted in an approximate loss of $115 million to over 2,000 cattle contract buyers nationwide. On January 29, 2026, a federal arrest warrant was issued for Link in the United States District Court, Northern District of Texas, Fort Worth Division, after he was charged with Conspiracy to Commit Wire Fraud.

Upon further research, I discovered that the SEC had previously brought a civil action against him and his co-conspirators. As I understand the scheme, the fraudsters sold specific cattle to individual investors, promised to hold on to the cattle, raise, feed, slaughter, and process them, and then buy the cattle back at a guaranteed higher price.  Of course, none of that actually happened – they just took the money.

So how is this a security, such that the SEC can bring an enforcement action? The SEC’s complaint makes clear that these cattle contracts were sold to investors on the promise of profit, and that the investors themselves were entirely passive which satisfies the first three elements of the Howey test for a security (investment of money, for profit, derived from the efforts of others).

But what about the common enterprise prong, if each investor thinks they’re buying individual cattle?

Certainly, broad vertical commonality is present here – in the sense that investors know the promoter will profit if they do – and that was enough for the Eleventh Circuit to find commonality met in the conceptually-similar case of Securities and Exchange Commission v. ETS Payphones, 408 F.3d 727 (11th Cir. 2005), where you bought a plot of land and telephone equipment that someone else would lease from you to run a payphone business and then buy back from you at the end of the contract.  But broad vertical commonality is fragile as a legal concept because there’s so much overlap with the “efforts of others” Howey prong.

So the SEC says something else.  According to the SEC’s complaint:

Agridime has not purchased enough cattle to fulfill its Cattle Contracts.  Agridime’s investors, therefore, do not actually invest in specific, identifiable animals. Instead, the success of the investments depends on the success of Agridime’s purported cattle operation, including its ability to attract new investors.

Get it? The investors think they’re investing in identifiable animals, but that didn’t actually happen, so any returns investors receive actually come from the (Ponzi scheme) enterprise, which is common across multiple investors.

Which sounds like an odd elision from investors’ subjective understanding to the reality of how any profits were made – but in the payphones case, and in other similar kinds of cases (like Miller v. Cent. Chinchilla Grp., Inc., 494 F.2d 414 (8th Cir. 1974), the infamous chinchilla-raising scheme, everyone loves the chinchilla-raising scheme), courts make a similar sort of move. They note that investors may be buying identifiable plots of land or chinchillas or cattle, but they can only make money when the promoter finds new investors.  ETS Payphones, 408 F.3d at 732 (“Investors were dependent upon Edwards’s ability to attract new business to realize profits.”); Central Chinchilla, 494 F.2d at 417 (“The record shows that the plaintiffs invested money in a common enterprise with the expectation that they would profit if the defendants secured additional investors.”).  And in a beaver-raising case, the Tenth Circuit found commonality in the fact that no one expected to profit from the beaver sales unless they understood the defendants to be taking part in a larger beaver industry, which was also sufficient for commonality, Continental Mktg. Corp. v. SEC, 387 F.2d 466 (10th Cir. 1967), and perhaps not unlike investors’ faith in “Agridime’s purported cattle operation.”

Anyway, leaving aside the grimness of the “raise-an-adorable-animal-for-slaughter” aspects of these schemes (“The owner may care for his own animals with each pair of beaver requiring a private swimming pool, patio, den and nesting box together with the services of a veterinarian…”) maybe the ultimate lesson here is really, courts aren’t interesting in getting into the weeds of where you find commonality when it walks like an investment scheme and talks like an investment scheme.

And another thing.  The Shareholder Primacy podcast is back! This week, Mike Levin and I talk about the securities fraud case against Elon Musk that appears to be heading for trial in March, and the latest (as of Sunday afternoon) developments in Warner/Paramount/Netflix.  Here at Apple; here at Spotify; here at Youtube.

The Weinberg Center has launched a short, anonymous survey of law professors on normative views of the shareholder proposal system under Rule 14a-8. The survey may take about 10–12 minutes. A link to the survey is available here:

https://www.surveymonkey.com/r/YWPHSC2

 If you have any questions about the survey, you can reach out to Larry Cunningham.

It was reported this week that OpenAI has disbanded its mission alignment team, and fired a woman (ostensibly because she discriminated against men) who opposed adding an “Adult Mode” to ChatGPT. Meanwhile, a former OpenAI researcher published a NYT op-ed about the erosion of OpenAI’s principles.

Notably, these moves come after OpenAI’s contentious restructuring into a Delaware public benefit corporation, which required assurances to the AGs of California and Delaware that the new structure would remain true to OpenAI’s original nonprofit mission to develop AI for humanity’s benefit. The way this was supposed to occur was that OpenAI-the-nonprofit was given a golden share to control OpenAI-the-benefit-corporation’s board.

The available evidence suggests … the mission may have been redirected.

Now, maybe that’s because of the identity of the individuals appointed to OpenAI-the-nonprofit’s board, which include current and former tech execs, a private equity guy, a corporate lawyer, and Sam Altman. And certainly, there may be a broader lesson here about the general toothlessness of the benefit corporation form – we’re seeing similar issues at Anthropic, which is also organized as a benefit corporation.

But the problem likely runs deeper. For one thing, we all remember when OpenAI’s board tried to fire Altman, resulting in an employee revolt. That wasn’t surprising, because OpenAI (and Anthropic) compensate their employees with equity – incentivizing them to prioritize financial value. OpenAI and Anthropic have operated much more like VC-backed startups than social enterprises, and that may ultimately be rooted in the fact that AI requires such enormous capital investment that it simply is not practical to expect anything other than prioritization of profit.