Legislative Developments in the Shareholder Proposal process
/House
On September 18, 2024, the US House of Representatives passed H.R. 4790, the Prioritizing Economic Growth Over Woke Policies Act.110 The legislation is an umbrella bill incorporating a number of other bills that, among other things, significantly increase the ability of companies to exclude shareholder proposals from the proxy statement, including:
amending the Securities Exchange Act of 1934 to prohibit the SEC from compelling an issuer to include in the proxy statement any shareholder proposal or any discussion related to a shareholder proposal. The bill also expressly states the SEC may not preempt state regulation of proxy materials or shareholder proposals. (Section 2002)
increasing requirements for resubmission of proposals to require 10% voting support for a first-year proposal, 20% for a second year proposal and 40% for third year proposal, compared to current requirements of 5% voting support the first year, 15% for the second year and 25% for the third year. (Section 3101)
allowing companies to exclude shareholder proposals where the company already has policies, practices, or procedures that compare favorably with the guidelines of the proposal and address the proposal’s underlying concerns. (Section 3201)
allowing companies to exclude any proposal relating to environmental, social or political issues from proxy or consent solicitation material. (Section 3301)
allowing companies to exclude a shareholder proposal under Rule 14a-8(i) without regard to whether the proposal relates to a significant social policy issue. (Section 3401)
requiring the SEC to conduct a “wasteful and unnecessary” study every 5 years on shareholder proposals, proxy advisory firms, and the proxy process, covering a variety of topics, including the purported costs incurred by the shareholder proposal process and the “risk that shareholder proposals may contribute to the balkanization of the US economy over time.” (Section 3501)
providing that an institutional investor may not outsource voting decisions to any person other than an investment adviser or a broker or dealer that is registered with the Commission and has a fiduciary or best interest duty to the institutional investor. (Section 3901)
Senate
On September 23, 2024, S. 5139, the Empowering Main Street in America Act of 2024, was introduced. Among other things, the bill would allow a company to exclude a shareholder proposal from its proxy statement without regard to whether that shareholder proposal relates to a significant policy issue. (Section 305)