Statistics on Resubmitted Proposals Demonstrate No Material Benefit of A Rulemaking

Heidi Welsh, Sustainable Investments Institute

As many know, the SEC is looking at a possible change to the rules about shareholder proposals, including if the requirements for filing proposals should change and whether a proposal should require more support to be resubmitted. One proposal floating around Washington suggests thresholds much higher than the current requirements of 3% the first year, 6% the second time and 10% for third-year proposals.

Being a big fan of fact-based policy making, and having the actual data at my fingertips here at the Sustainable Investments Institute (Si2), I decided to run a couple of scenarios. Here's what I found, which roundly belies the need for change—or at the very least, suggests that it would be a lot of bother for a very tiny problem.

One assertion by critics of ESG shareholder resolutions is that the same thing keeps getting submitted to loads of companies ad infinitum, with little support. These are "zombie" proposals, according to these folks. But I've found little evidence these creatures exist in the harsh light of actual reality.

Let's apply what I'm going to call the Zombie Index to what's happened in the last five years. This is what it looks like:

  • Number of environmental and social issue proposals filed at U.S. companies, 2015-19: 2,301

  • Number of these proposals that went to votes: 1,054

  • Number of these proposals that were resubmitted 3 or more times: 74 (7% of those upon which investors voted)

  • Number of resubmitted proposals under current rules that failed to meet resubmission requirements in the third year (getting at least 10%): 4 (5% of the persistent 74)

  • Number that would be blocked for further reconsideration if the 3rd year threshold were 20%: 11 (15% of the persistent 74)

  • Number that would be blocked if the 3rd year threshold were 30%: 22 (30% of the persistent 74)

My conclusion: if the resubmission threshold were increased to 30%, another 18 resolutions would be excluded. Zombies just are not lurking. I leave it to somebody else to figure out how much it would cost to block each of those 18 proposals. Certainly a lot more than zero.