1. The ROM file must be in the same folder as SheepShaver and must have the exact name "Mac OS ROM".
2. The SheepShaver application must be set to run in 32-bit mode (see Finder Info for the app.)
3. There is an issue with Sierra (in fact an additional new security feature in Sierra) that prevents a newly installed SheepShaver to run. The workaround is described by Cat_7 in another thread:
The procedure to get it running is simply to copy the program to the desktop, remove the old program in the SheepShaver folder and move the new copy from the desktop to the SheepShaver folder.