In the midst of the chaos enveloping Washington, DC, there is a danger that you may lose track of developments affecting your shareholder rights. At risk is your right as an investor, together with your trustees and advisors, to engage with public companies to improve governance, and to elevate attention to emerging risks that may affect financial returns over the long term.
Through shareholder proposals, investors can communicate with fellow shareholders on issues of concern, and demonstrate shareholder voting support on neglected issues such as the risks posed to the company from climate change, the need to bring more people of color and women to the board, or the need to reform broken governance processes of board or management. There is pressure from the Business Roundtable and a few large companies on the Securities and Exchange Commission, seeking to weaken the shareholder proposal rules as part of the current Administration’s rollback of business regulatory requirements.
Where can I learn quickly about the threats to my rights?
A new website, the Investor Rights Forum, provides a primer on your Rights at Risk. The site also documents the important impacts of the shareholder proposal process. For instance, a case study profiles the work of religious investors to guide pharmaceutical companies to take action to avoid mishandling the opioid crisis. It is no exaggeration to say that proposals like these may help to steer companies away from the edge of bankruptcy-inducing mismanagement and risk. The site also profiles governance reform efforts, such as the New York City employee pension funds campaign using the shareholder proposal process to promote proxy access.
The Securities and Exchange Commission has announced that it is considering conducting a rulemaking to alter the thresholds for filing or resubmitting shareholder proposals. These moves could significantly restrict the ability of investors to file important, non-binding resolutions with companies they hold shares in. In addition, the SEC recently announced a change in the manner in which it handles decisions regarding whether proposals may be excluded from a proxy statement (“no-action decisions”). The newly announced policy, under which the SEC may issue oral decisions instead of written ones, or even decline to address a proposal entirely, appears likely to increase the costs and uncertainties associated with filing a shareholder proposal.
Shareholders Push Back.
The site provides examples of models of correspondence for investors concerned about preserving these rights, which could allow you as an investor to submit your own letter to the decision-makers at the SEC and the House Financial Services Oversight Committee in Congress. For instance, the site highlights a September 13, 2019 letter from investors representing 525 Billion in assets under management asserting that changes in the shareholder proposal rules are unnecessary, and another letter from investment coalitions including the Council of Institutional Investors and Ceres, urging the SEC to rescind the potentially radical changes to the no action process.
The Investor Rights Forum website has been produced through the combined efforts of three investor organizations - the US Social Investment Forum, The Interfaith Center on Corporate Responsibility and the Shareholder Rights Group.