How Retail Investors Shaped Corporate Governance

Many corporate governance policies that today are viewed widely as best practice were initially driven by the shareholder proposals of small individual “Main Street” investors—not large institutions—and then expanded to common adoption by markets.

Going back to the 1940’s, a small, dedicated group of individual investors have played a leading role in the filing of governance-related shareholder proposals that received high levels of investor support and drove many reforms covering a range of governance topics. These reforms have enhanced capital markets by strengthening the ability of boards to oversee shareholder interests and by addressing power imbalances between investors and company boards and management, proof that many constructive ideas have come from smaller individual investors.

It has driven many reforms covering a range of governance topics, including eliminating staggered director terms, reducing supermajority voting thresholds, requiring an independent board chair, eliminating dual class voting, requiring shareholder approval of bylaw amendments, requiring majority voting in uncontested director elections, and proxy access for shareholder director candidates. The governance-related proposals of individual investors attracted, on average, 47.8% shareholder support between 2005 and 2018, and accounted for a large portion of the passed proposals, an indication that these proposals were receiving widespread support from larger investors. Many of these issues were also adopted by major investors in their proxy voting guidelines and corporate engagements, by market exchanges, and by companies— compelling evidence that constructive ideas have come from these smaller individual investors.

Some examples of corporate governance policies that today are viewed widely as best practice and that were initially driven by shareholder proposals and then expanded to common adoption by companies and markets, include:

• ƒ  Independent Directors and Board Recruitment: Shareholder proposals have encouraged norms such as independent directors constituting a majority of the board, independent board leadership, transparency of board recruitment and qualifications, and annual elections for all directors. For example, in 2013, shareholders submitted approximately 70 proposals requesting the adoption of a policy requiring that the company’s board chair be an independent director.

• ƒ  Electing Directors by Majority Vote: Shareholder proposals have encouraged electing directors by majority vote, rather than by plurality—a radical idea a decade ago when shareholders pressed for it in proposals, and now the norm at 90% of large-cap U.S. companies.29 In 2011, Apple was one of 58 companies the California Public Employees Retirement System urged to adopt majority rather than plurality voting, which more evenly balances power between the company and its investors.30 The proposal had majority support from shareholders at Apple and many other companies.

• ƒ  “Say-on-pay”vote requirements: Now mandated by the Dodd-Frank Act—say on pay vote requirements originally resulted from shareholder proposals. The Say-on-Pay vote asks investors to vote on the compensation of the top executives of the company—the CEO, the Chief Financial Officer, and at least three other most highly compensated executives (“named executive officers”).

Shareholder Proposals: Bridging Governance and Regulation

How policy-aligned proposals shape ESG credibility and investor confidence

In a rapidly evolving ESG policy landscape, shareholder proposals are no longer just investor opinions—they are tools that anticipate and influence regulatory alignment. A 2025 study by Luca and Clement dives into this shift, analyzing how proposals that reflect emerging regulatory frameworks (like the SEC’s climate disclosure rules or Europe’s CSRD) can enhance a firm’s ESG profile and attract institutional capital.

The researchers reviewed dozens of U.S. and European proposals filed between 2017–2024 and linked them to outcomes such as ESG ratings trajectory, portfolio inclusion by ESG-screened funds, and net changes in institutional shareholding.

📌 The Key Finding: Regulatory Synergy Works

Proposals that mirror emerging policy trends (like requests for Scope 3 emissions disclosure or alignment of lobbying practices with stated climate goals) were:

• More likely to be implemented, especially in companies facing global investor pressure;

• Associated with improvements in third-party ESG credibility scores;

• Positively correlated with increases in long-horizon institutional investment, especially from European funds that screen for regulatory preparedness.

🧠 Why This Strategy Is Working

Boards that engage with these proposals are hedging regulatory risk and building investor trust. Instead of waiting for mandatory compliance, these companies use shareholder proposals as a way to “pre-comply” with known regulatory shifts, creating more agile, resilient governance frameworks.

The research supports what sophisticated investors already practice: well-crafted ESG proposals are strategic, not burdensome. They build credibility with regulators, appeal to allocators, and reduce uncertainty.

For more, access the full publication here.

Workplace Health and Safety

Amazon has been in the news concerning its unsafe working conditions, including rates of safety incidents far above those of its competitors, such as Walmart and Costco. State labor regulators have alleged that working at Amazon exposes employees to increased risk of ergonomic injury and musculoskeletal disorders as they awkwardly bend and twist to move goods through the warehouse. According to a December 2024 report of the Senate Committee on Health, Education, Labor, and Pensions, at least two internal Amazon studies found a link between how quickly its warehouse workers perform tasks and workplace injuries, but the company rejected many safety recommendations out of concern that the proposed changes might reduce productivity. Shareholder resolutions at Amazon in 2022, 2023, and 2024 focused on this potentially harmful conduct, asking the company to report on worker health and safety and the treatment of its warehouse workers.

Consistent support above 30% over three years shows significant investor concern. Amazon has responded by reinforcing its existing safety narrative, highlighting improvements, opposing external audits, and publicly disputing federal findings. The outcome underscores both the influence and ongoing limitations of shareholder-driven engagement at the company.

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For NPR’s coverage of the issue, please check here.

Rail Safety

Shareholder engagement on railroad safety has been an important force in pushing rail transport corporations to prioritize long-term risk management and community well-being. Following the financial and human costs of disasters like the East Palestine derailment to the local community and surrounding states, the rail industry was resistant to safety measures, blocking regulations such as two-person crew requirements. In response, in 2024, investors filed shareholder proposals at major rail companies such as CSX and Union Pacific aimed at creating safety-focused board oversight of reforms to prevent derailments, protect workers, and safeguard communities. This underscores the importance of shareholder advocacy to hold companies accountable for ethical behavior, address material financial and reputational risks, and preserve shareholder value.

Investor action has already begun to influence corporate behavior. In 2024, CSX agreed to publish a report on safety practices following shareholder pressure, and Union Pacific faced heightened scrutiny over its board’s oversight of derailment risks. These examples highlight how shareholder proposals can push companies to adopt stronger safety standards, demonstrating the material relevance of investor engagement in protecting both communities and long-term shareholder value.

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The Washington Post covers the rail industry’s response to the issue of rail safety.

Shareholder Activism Pays Off- Costs vs. Long-term Value

New data confirms: shareholder engagement creates long-term value

Legal fees, data analysis, proxy solicitation, engagement staff—it makes some forms of shareholder activism costly to the investors who undertake it I am everyone happy Friday good to see everyone thank you for being flexible with the time. But a groundbreaking study by Gantchev (2013) used a sequential decision-making model to ask the real question: Is it worth it?

The answer: Yes—especially when targeted at governance reform or capital misallocation.

Gantchev’s study modeled the full lifecycle of activist campaigns, accounting for costs at every stage. He found that successful engagements (those that resulted in changes to capital policy, board structure, or leadership) produced net benefits to shareholders—even after subtracting all expenses.

💡 The Key Takeaway

The most effective campaigns were those that:

• Chose targets wisely — companies with weak governance and clear value gaps;

• Had staying power — persistence across multiple years increased both implementation and performance impact;

• Focused on fundamentals — especially capital return policies, entrenchment, and board effectiveness.

🧨 Why This Matters in 2025

Critics of shareholder proposals argue they are wasteful, confrontational, or harmful to management discretion. But Gantchev’s data suggests the opposite: When activism is data-driven and focused, it’s one of the most value-accretive tools investors have.

That makes recent attempts to raise the resubmission thresholds for proposals all the more concerning. If fewer proposals can be filed or resubmitted, many campaigns would never reach the performance-inflecting stage.

📎 For more: “The Costs of Shareholder Activism”

CalPERS and the Power of Pension Fund Activism

What long-term investors taught Wall Street about board accountability

When most people think of shareholder activism, they picture hedge funds pressuring companies for quick wins. But some of the most influential and enduring corporate governance reforms in the U.S. have been driven not by hedge funds, but by public pension funds—and the gold standard of this strategy is CalPERS.

In a landmark study by Del Guercio and Hawkins (1999), researchers analyzed CalPERS’ campaign strategy targeting underperforming companies with entrenched governance structures. Their findings? Engagements initiated by CalPERS led to statistically significant improvements in both firm performance and governance in the years following proposal filings.

📌 What Made the CalPERS Model Work?

• It focused on long-term economic value, not just market optics.

• Proposals were filed at companies with governance red flags: staggered boards, golden parachutes, poor oversight.

• CalPERS used its public accountability and reputational leverage to demand reforms—like board independence, executive pay realignment, and improved disclosure.

What’s more, many of these proposals never even required a shareholder vote to drive change. The reputational pressure alone often pushed boards to act.

🧭 Why It Still Matters Today

In a world increasingly focused on ESG performance and systemic risk, the CalPERS model offers a blueprint for responsible, credible, and effective shareholder engagement. These campaigns weren’t speculative—they were laser-focused on fixing structural weaknesses that posed financial and reputational risk.

Pension funds still rely on Rule 14a-8 to elevate concerns at annual meetings. Without that right, the gains of the last 30 years—like improved director accountability and board independence—could easily erode.

🔗 Learn more from the 1999 Landmark Study- The Motivation and Impact of Pension Fund Activism

The History of SEC rules and Shareholder Proposal Regulation

During the United States’ first century, corporations had small numbers of investors and were largely controlled by shareholders through deliberations and voting that took place at in-person shareholder meetings. As the US economy grew, and corporations had to bring in large amounts of capital from thousands of investors, shareholder meetings went from in-person affairs to being conducted by proxy, and management solicited blanket voting authority based on little or no information. Ownership and control were largely divorced, and corporate abuse of the proxy, which frustrated the free exercise of the voting rights of stockholders, was rampant. Section 14 of the Securities Exchange Act of 1934 addressed this concern by authorizing the SEC to regulate proxy solicitation.

The SEC adopted the predecessor to SEC Rule 14a-8 in 1942, recognizing that shareholders need notice of proposals to be made by fellow shareholders. One court explained that, “the rationale underlying this development was the Commission’s belief that the corporate practice of circulating proxy materials which failed to refer to the fact that a shareholder intended to present a proposal at the annual meeting rendered the solicitation inherently misleading.” SEC Staff reiterated this purpose, explaining that “[t]he Senate Banking and Currency Committee recognized the need to provide not only for disclosure of matters management planned to present, but also for shareholders to be given ‘reasonable opportunity to present their own proposals and views to fellow security holders.”

Thus, SEC Rule 14a-8 advances the overall Securities Exchange Act’s goal of shareholder democracy—a central purpose of the 1934 Act in reaction to weakening shareholder control and increasingly concentrated corporate power in professional managers. Shareholder democracy stands for the principle that, in return for access to the securities exchanges, the law provides that corporations would incur a corresponding duty to give the shareholders fair suffrage. Referring to 14a-8, one recent judicial decision noted that “[t]he Commission enshrined this edict in its regulations, believing that “fair corporate suffrage” required that all shareholders receive notice of such matters when their proxies are solicited.”

How Investors Deploy Shareholder Proposals

Patrick Miller speaks with Sanford Lewis regarding investors who file shareholder proposals at publicly-traded US companies related to social and environmental issues. They discussed the process for submitting these proposals pursuant to SEC rules.

HOST: Patrick Miller is the Founding Attorney at Impact Advocates APC.

*Disclaimer: The information in these recordings is provided for informational purposes only. You should consult with an attorney before you rely on this information. This information should not be seen as legal advice and does not create an attorney-client relationship. This interview is meant to be a general discussion and may not include all relevant information regarding the issues covered.

Opioids crisis

According to the CDC, opioids were involved in nearly 75,000 overdose deaths in 2023,77 a crisis that continues to ravage communities across the country. The sale and distribution of opioid medications carries significant legal and reputational risks for companies with long-term and systemic societal and economic impacts.

The Investors for Opioid and Pharmaceutical Accountability (IOPA) was a diverse coalition of global institutional investors with 67 members representing over $4.2T in AUM that was established from 2017-2023 to engage opioid manufacturers, distributors and retail pharmacies. IOPA members filed more than a hundred shareholder proposals and took on the most important governance reforms within major pharmaceutical companies to better manage societal and enterprise risks. Central to the IOPA’s strategy was to involve the board in opioid risk management by asking independent directors to investigate and report on how the board is assessing and managing legal, financial and reputational risks related to its opioid business. Fourteen of these companies agreed to conduct board-level risk assessments of opioid-related business practices including governance, compliance, compensation, and political lobbying, and to report these findings publicly. Two companies created a board-level committee dedicated to opioid oversight.

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For further information on corporate engagement with health equity issues, see ICCR’s page.

Proxy Voting Guidelines

For Institutional Investors

As institutions determine how to vote their shares at upcoming meetings, they can draw on a range of resources, including proxy voting policies and guidelines published by organizations that prioritize ESG risk management and sustainability outcomes.

Norges Bank Investment Management

They are a long-term and global investor with the mission to safeguard and build financial wealth for future generations. When they make voting decisions, they seek to further the long-term economic performance of investments and reduce financial risks associated with the governance of companies and their environmental and social practices. These guidelines reflect the Management Mandate for the Government Pension Fund Global and Norges Bank’s Executive Board Principles for Responsible Investment Management.

Click here to view Norges Bank’s latest global voting guidelines.

As You Vote

As You Vote is the most sustainability focused and justice aligned proxy voting policy available. Easy to use. Affordable. Fees support non-profit shareholder advocacy on risk related issues such as climate change, workforce opportunity, ocean plastics, industrial farming, political spending, and other under addressed risk issues.

Go here to review the latest proxy voting guidelines.

2025 Proxy Voting Analysis

Author- Julie Wokaty

Proxy voting is an essential part of investors’ fiduciary duty and stewardship. The proxy voting data of the largest asset managers offers useful insights into how they exercise their oversight of managements’ decision-making, reveals how they align their recognition of material risk with their asset owner clients and how they address significant environmental, social and governance (ESG) risks.

ICCR has worked with asset owners to engage asset managers on their proxy voting guidelines and records, and offered feedback to asset managers on their proxy voting records, policies and current disclosures. Such disclosure and transparency are essential. It allows clients, beneficiaries, and the public to see whether these powerful financial institutions are truly voting in alignment with long-term value creation, effective risk management, and responsible corporate citizenship. Our new report seeks to help investors do just that by comparing asset manager voting on key management and shareholder proposals in 2025.

Read the full report now.

Why Faith Groups Have Historically Practiced Responsible Investing

The full statement can be found on ICCR’s website.

Religious organizations steward their organizational finances and the investments managed on behalf of their constituents and beneficiaries in alignment with the beliefs, teachings, and values of their respective faiths. Many religious organizations develop investment guidelines, which include strategies such as screens to exclude industries that they believe cause injury to society, shareholder engagement with portfolio companies to mitigate environmental and social harm, and investing in companies or projects that are making a direct and positive impact.  This practice, known as faith-consistent investing, is one form of what today is commonly referred to as sustainable and responsible investing. Faith-consistent investing is a fundamental right protected under the First Amendment, which guarantees both free speech and religious freedom, and ensures that investors are able to make their investment decisions in accordance with their beliefs.

The Interfaith Center on Corporate Responsibility (ICCR) is a coalition of over 300 faith and values institutional investors who, for more than 50 years, have been leaders in faith-consistent and sustainable investing. Our genesis as an organization is grounded in the advocacy of multiple faith groups to address the racist apartheid regime in South Africa. Faith-consistent investing leads religious investors to assess how corporate policies and practices may adversely impact the health of people and the planet, which has a direct impact on the long-term performance of their portfolios.

Faith-based investor engagements with portfolio companies, through dialogue and the filing of shareholder proposals, are a natural extension of these beliefs and are central to both our duties as trusted fiduciaries seeking competitive returns and our responsibilities as faithful stewards supporting the fundamental values of our religious traditions. For this reason, we are concerned about any attempts by legislators or policymakers to interfere with investors’ fundamental freedom to make investment choices and/or engage with portfolio companies in alignment with their investment philosophies and institutional values. This includes letters received from the House Judiciary Committee in 2024 by several of ICCR’s faith-based members requesting informational disclosures under the pretense of exploring violations of antitrust laws.

While each faith institution has its own set of priority issues that it addresses through its respective ministries and advocacy work, there are many issues where faith investors’ interests converge. Actions to mitigate the climate crisis ravaging our planet, to uphold human rights, including the fair treatment of workers, and to ensure equitable and affordable access to healthcare are just a few examples of priority issues of common concern among many faiths.  The 2016 Edinburgh Finance Declaration is one example of the world’s leading faiths articulating their shared values. We believe that companies that adopt forward-looking policies and practices to mitigate environmental and social risks are well-positioned for long-term financial success and value creation. Conversely, companies that ignore these risks may endanger the performance of the capital we are called to steward, and impose enduring external costs on society, the economy, and the planet that sustains us. Over the past 50+ years, ICCR member engagements with corporations on these issues have resulted in improved conditions for various stakeholders, including workers, customers, communities, and shareholders. For instance, most of the world’s faiths emphasize stewardship of the planet, care for creation, and moral responsibility toward the environment, which makes them deeply concerned about the climate crisis. Faith investors working in climate-vulnerable communities witness firsthand how climate change adversely affects these areas. Without the adoption of meaningful climate mitigation and adaptation measures, extreme poverty and inequality, risks to land, food and water security, forced migration and geopolitical conflict, along with global health risks, will all intensify. Consequently, faith investors often align with other like-minded investors to tackle climate risk and advocate for a reduction of GHG emissions from our portfolio companies. Faith-based investors actively promote worker justice, which includes workplace health and safety protections, the provision of a living wage, and the freedom to associate and engage in collective bargaining. Faith-based investors have advocated for health equity, engaging with the world’s largest healthcare companies to ensure that medicines and healthcare services are affordable and accessible reaching those most in need.

Importantly, while we often cooperate in investor spaces around strategies to spur corporate action, we make independent investment decisions to provide risk-adjusted returns to our individual constituents and beneficiaries in line with our respective faith beliefs. The U.S. Constitution provides that “Congress shall make no law respecting an establishment of religion or prohibiting the free exercise thereof,” and the First Amendment protects the religious liberty that is foundational to this great nation. This ban against government interference in faith-consistent practices is essential when considering all aspects of the life and work of religious institutions, including their investment decisions.  It preserves their autonomy to invest their organizational assets and the pensions of their millions of beneficiaries in a manner consistent with their religious beliefs.  In recognition of the constitutional limits of entanglement between the federal government and religious institutions, Congress included a Church plan exemption in the Employee Retirement Income Security Act of 1974 (ERISA).

We want to reiterate our belief that companies committed to addressing their impacts on society and the environment are better positioned for financial success over the long term. For this reason and because our faith calls us to do so, we will continue to invest and engage with our portfolio companies to realize that goal.

Governance Proposals

Governance proposals and the role of individual investors

Governance engagements seek to ensure that a well-functioning board can effectively oversee the interests of shareholders. For example, proposals to increase the independence of the audit or risk committee have the potential to reduce accounting fraud risk. Likewise, engagements to increase the holding period of equity-based pay reduce management incentives to manipulate short-term earnings.

Governance shareholder proposals can also increase investors’ ability to engage with companies. It has been shown that it is more costly for investors to engage with companies with entrenched managers.14 The entrenchment of management is principally measured and affected by the corporate governance infrastructure including whether the company has characteristics such as:

• Staggered boards ƒ  

• Limits to shareholder by-law amendments

• Supermajority requirements for mergers ƒ  

• Supermajority requirements for charter amendments ƒ  

• Poison pills ƒ  

• Golden parachutes

Shareholder proposals that improve corporate governance structures on these aspects are frequently part of an overall strategy by investors to provide a better balance of power between investors and a company’s management and board.

Proxy Voting for Endowments

What You Need to Know About Proxy Voting for Endowments

Proxy voting has historically been a cumbersome process for endowments; however, As You Vote, an ESG-aligned proxy voting platform, simplifies proxy voting and empowers endowments and other institutional investors to vote their proxies in line with their ESG mandates.

Proxy voting holds significant importance in aligning the mission of endowments with their investments. As You Vote simplifies this underutilized tool and enhances the process so endowments can exercise their right to vote their proxies and meet their active engagement goals without the increased demands of time and expertise. This seamless, customizable platform supports endowments so they can act on corporate governance issues that matter to their long-term economic interest.

ABOUT THE INTENTIONAL ENDOWMENTS NETWORK

The Intentional Endowments Network (IEN) is a peer learning network of 200+ asset owners, asset managers, consultants, OCIOs, and nonprofit partners. An initiative of the Crane Institute of Sustainability, IEN works to advance the field of sustainable investing and encourage endowments and institutional investors to allocate capital in a way that creates a low-carbon, equitable, and regenerative economy.

Click here to learn more about IEN.

The complete guide to proxy voting

What does Proxy Voting mean?

Anyone with a 401(k) or other investments owns company shares and is, therefore, a shareholder. Proxy voting is the process, and proxy voting guidelines are the principles and rules that ensure those people and institutions still have a voice. In a recent Vanguard survey, the majority of investors expressed a desire to use that voice, with 58% saying they were more likely to invest in a fund if they could influence proxy voting decisions.

In a shareholder or corporation's absence, an individual or firm casts a proxy vote on their behalf. Because proxy voting is the single most important avenue by which publicly traded companies report to shareholders, following rigorous guidelines is essential. The 2025 proxy season introduced significant regulatory changes and new compliance requirements that make understanding these guidelines more critical than ever.

Read more to learn about the key components of Proxy Voting.

Own Your Vote

Proxy Voting is how your voice can be heard

When you invest in a company or purchase a mutual fund, it makes you an owner. Ownership gives you a voice in how the company or fund is run. The main way shareholders can make their opinions heard is by voting on shareholder resolutions at meetings convened for that purpose.

Shareholders can participate in the decisions that have a real impact on the long-term performance of an investment. Whether voting on proposals that help shape the strategic direction of a company or its management, or the weighing in on the investment mandate of a mutual fund, shareholders have a voice in how their assets are managed. This is why we tell shareholders to own your vote.

"Voting at shareholder meetings, generally via a proxy vote, is one way you can exercise your rights as an owner."

Learn about the proxy process and issues you may need to vote on.

Learn the Process

Understand the power of your voice and the impact your proxy vote can have.

Understand How

See how easy it can be to vote your proxies and your voting options.

See Your Options

Learn more about your investments by reading the communications you receive.

Stay Informed

S&P Global Market Intelligence: SEC proposed rule would have blocked 614 ESG resolutions since 2010, data shows

Author: Esther Whieldon

Since 2010 more than 600 environmental, social and governance-related resolutions likely would have never advanced under a newly proposed rule by the U.S. Securities and Exchange Commission, according to data the Sustainable Investments Institute shared with S&P Global Market Intelligence.

The SEC in November 2019 proposed to increase the amount of support a shareholder resolution required to be reconsidered in the years following an initial vote. Rather than resolutions needing at least 3% support the first year, 6% the second year, and 10% the third and subsequent years after an initial vote to be reconsidered, the SEC would raise those thresholds to 5%, 15% and 25%, respectively. The agency estimated the changes would cut the number of shareholder proposals by 7%.

While the rule has yet to be finalized, the Sustainable Investments Institute, or Si2, compiled a database of ESG resolutions voted on from the beginning of 2010 through Nov. 18, 2019. Si2 found that 614 ESG-related resolutions, or about 30%, of the 2,019 proposals voted on at company annual meetings over that period would not have been eligible for resubmission. That total is almost three times the number of resolutions — 206 resolutions — that could have failed existing threshold requirements over that time, according to Market Intelligence's analysis of the data.

Of the 614 potentially impacted resolutions, political activity, climate change and human rights issues would have taken the biggest hit.

Companies are coming under increased pressure from investors to disclose how ESG risks could impact their bottom line, and they are addressing those risks and opportunities. But groups such as the U.S. Chamber of Commerce and Business Roundtable have pushed for reforms to the shareholder resolution process.

Shareholder Rights Group: At Boeing, Wells Fargo, Chevron - SEC Rulemaking Proposals Would Have Blocked Investor Engagement on Critical Issues

Immediate Release
January 7, 2019

The Shareholder Rights Group (SRG), a coalition of investors who exercise their right to file shareholder proposals, has written to the Securities and Exchange Commission (SEC) in opposition to proposed rule changes that would effectively undermine the ability of shareholders to continuously promote increased corporate responsibility and improved corporate governance.  [Link to letter] 

Currently, shareholders that own at least $2,000 in stock for one year have the right to engage an investee company on an issue of concern through procedures set forth in the SEC’s Rule 14a-8. In late 2019, the SEC proposed dramatic changes to the Rule, undermining shareholders’ rights to hold companies accountable for risk mitigation and crisis management. In addition to making it harder to file proposals by requiring larger or longer-term holdings, the rulemaking proposal would make it more difficult for shareholders to submit a proposal to a second or third vote by imposing steep voting thresholds – 25% support by the third year, and disallowing a proposal if it suffered a loss of momentum after that. The SRG letter notes that “[i]n practice sometimes 10% or 20% of investors represent the leading edge of an issue - the prescient minority, and therefore it is not wise for the management to discount the topic they are surfacing.” 

The SRG’s letter highlights three case studies in which shareholders preemptively sought disclosure or oversight of certain issues that have proven to be significant concerns for those companies. Specifically, the SRG’s letter explains how the proposed rule changes, if they had been in effect at the time of shareholder engagement, would have interfered with investors’ ability to directly respond to recent corporate responsibility crises and controversial operations at Boeing, Wells Fargo, and Chevron. 

Boeing: Prior to the two crashes of Boeing’s 737 Max airliners in 2018 and 2019, shareholders had encouraged better disclosure of Boeing’s notoriously aggressive lobbying policies, expenditures, and internal controls. Under the SEC’s proposed rulemaking on resubmissions, shareholder proposals on lobbying would have been barred beginning in 2017 – shortly before the 737 Max crashes. Yet, after the 737 Max crashes, shareholders supported lobbying disclosure with 32.6% of the vote in 2019. Had the proposed resubmission thresholds already been in place, shareholders would have been denied an opportunity to address this matter with the company in the wake of these catastrophic events.

Wells Fargo: Wells Fargo has suffered and continues to suffer a prolonged crisis of public, government, and consumer trust, having paid over $17.2 billion in penalties since 2000. The establishment of 3.5 million fictitious or unauthorized accounts, and improper practices in which 800,000 people were forced to take redundant auto insurance from 2012 to 2017, have punctuated an era of predatory practices. Had the SEC’s proposed resubmission thresholds been in place, shareholder proposals concerned about the ethical and business risks of predatory lending would have been excludable from 2013 to 2016. Additionally, under the SEC’s proposed threshold changes, shareholder proposals seeking an independent board chair would not have been permitted from 2013 to 2016 – a change that the company quickly enacted after its 2016 account fraud scandal. The failings of leadership, toxic corporate culture, and misdirected incentives have cost at least $24 billion in market value, despite early prescient shareholder engagement.

Chevron: In the U.S., advancement on corporate climate change mitigation initiatives has been driven to a large degree by shareholder proposals and shareholder engagement. One informative example is the progression of hydraulic fracturing and methane proposals at Chevron. Shareholder engagement from 2011-2015 had led to significant advancement of Chevron’s environmental practices and reporting; during this timeframe, shareholder support ebbed and flowed reaching highs of 40% (inspiring corporate action) and dipping to 26% before rebounding to over 30%. In 2018, approximately 45% of Chevron’s shareholders voted in favor of a shareholder proposal related to fugitive methane reduction, which again inspired a corporate response on the issue. However, had the SEC’s newly-proposed “momentum requirement” been in place, this natural variation of shareholder support would have meant that investors would not have been offered the opportunity to vote on that 2018 proposal that they resoundingly supported. 

Sanford Lewis, Director of the Shareholder Rights Group explains in the letter that “[i]n our assessment, the SEC’s proposed proxy rule changes would disrupt functional working relationships between shareholder proponents, institutional investors, and proxy advisors and companies. The proposed rule changes would make the path of investor engagement steeper and more convoluted, adding unnecessary costs and red tape, and making it more difficult for investors to foster sustainability, risk management, and governance improvements at their companies. It would block the most established and effective path for improving environmental, social, and governance (ESG) disclosure and performance of the market.”

The Shareholder Rights Group urges all concerned investors to write to the SEC in opposition to the proposed rules by the February 3 comment deadline. Additional info on the proposed rule changes, including links to the proposed rules are included at InvestorRightsForum.com

The SEC is accepting comments on the proposed rules until February 3, 2020. Write to:  Vanessa A. Countryman, Secretary, U.S. Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090; Email to: rule-comments@sec.gov. Email or hard copy subject line should include reference to the File No. S7-23-19 (shareholder proposals) and File No. S7-22-19 (proxy advisors).

Business Roundtable Must Defend Shareholder Access to Proxy

In a letter to the Business Roundtable, ICCR’s CEO Josh Zinner highlights the inconsistencies in the BRT’s statement and its ongoing attack on the shareholder proposal process, and urges the BRT to align its positions on the proxy process in furtherance of a corporate purpose that serves all stakeholders, and leads to long-term value.

We write today for two reasons. The first is to commend the Business Roundtable (BRT) and the 181 CEOs who endorsed the new Statement on the Purpose of the Corporation(the “Statement”), embracing the importance of companies’ commitment to key stakeholders. The statement acknowledges a central tenet of ICCR’s core philosophy: that companies focused on the well-being of all their key stakeholders and not just on boosting short-term shareholder returns will be more successful over the long term. A growing community of ESG investors have been supportive of companies demonstrating leadership in corporate responsibility for years, with the firm belief that these companies are building long-term value for shareholders.We expect the BRT CEO statement will stimulate an important dialogue within companies,investors and the broader public.

However,the principles clearly articulated in the Statement makes the BRT’s continuing lobbying and public statements against shareholder resolutions dealing with environmental, social and governance issues even more perplexing. We urge the BRT to reassess its campaign against shareholder resolutions in light of the new statement.

We read with interest the June 3,2019 BRT letter to the Securities & Exchange Commission (SEC Letter) and take issue with several of the assumptions used to support the BRT’s argument. The BRT’s characterization of the issues raised in the proxy process, as well as the motivations of shareholder proponents, is a simplistic description that is false and misleading.

Read the letter

Investor Voice: SEC’s Proposed Rule Changes Muzzle Shareholders and Shield CEOs From Accountability

SEATTLE – The U.S. Securities and Exchange Commission voted today to consider sweeping changes to the regulations governing the shareholder proposal process which negatively impact small investors as well as proxy advisory services. The proposed changes to Rule 14a-8 include substantially more strict and complicated thresholds for filing, significantly higher resubmission requirements, serious free speech infringements on independent third-party proxy advisory services, and onerous restrictions on an investor’s essential agency right to seek assistance. 

“The shareholder proposal rule is the bedrock of effective corporate engagement in the United States,” said Bruce Herbert, chief executive of Investor Voice.  “For over 70 years, the shareholder engagement process has been a vital tool for stockowners to propose good ideas involving sustainability, profitability, and governance; to hold CEOs accountable for mismanagement; and to mitigate risk by addressing issues like climate change and human rights.” 

“These proposed changes were not asked for by investors,” Herbert continued, “they are the result of a concerted influence campaign backed by large industry associations. Key players were the Business Roundtable, National Association of Manufacturers, and the U.S. Chamber of Commerce – each of whom believes that responding to small investors creates an undue burden on the corporation.”

The proposed changes, Herbert said, are a solution in search of a problem.  Trump appointees to the SEC, including Chair Jay Clayton and Commissioner Elad Roisman, argue that change is needed to ‘modernize’ the shareholder engagement process, asserting that the rules have not been “revised” in decades.  

“However,” Herbert observed, “that argument is highly misleading because ‘revision’ is very different from ‘review’ – the fact is that the shareholder engagement rule has been reviewed many times over the decades and always found to be fresh and beneficial as it stood.  Focusing on ‘revisions’ while ignoring ‘reviews’, as Clayton and Roisman purposefully do, is like asserting that someone who goes in for annual check-ups has received no medical attention whatsoever unless and until they undergo surgery.”

The two Democrats on the commission, Allison Lee and Robert Jackson, blasted the proposed changes as a power-grab by corporate CEOs.  “The bottom line is that today’s proposals would shift power away from shareholders and towards management,” said Commissioner Lee.

Commissioner Jackson, meanwhile, argued that, while some minor reforms may be needed, today’s proposals “amount to swatting a gadfly with a sledgehammer.”

The Commission passed the motion to consider the proposed changes on a party-line vote of 3-2.  The public will have only 60 days to submit comments to the SEC once the proposals are published in the Federal Register.

Contact:  Bruce Herbert  
206-522-3055  team@investorvoice.net