“It’s not broken, don’t ‘fix’ it.” 

The Investor Rights Forum contains extensive evidence that the existing shareholder proposal rule is not broken, and does not merit consideration of changes to the rule’s thresholds:

SHAREHOLDER SUPPORT. Shareholders at numerous companies are increasingly voting in favor of the proposals, demonstrating that the shareholders want the opportunity to weigh in on the issues raised in proposals by both small and large investors.

NUMBER OF PROPOSALS IS NOT GROWING. The number of proposals being filed has generally held steady from year to year. It is not increasing.

THE RULES WORK. The rules already screen out proposals that are not significant to the company or that reflect a personal grievance.  It is rare that an “idiosyncratic” proposal that is of no interest to other investors makes it to the proxy. In those cases, shareholders reject the proposal and prevent its resubmission.

VALUE TO COMPANIES AND SHAREHOLDERS. The proposal process provides significant input to the governance of companies. It encourages investors to put their resources — both time and money — to promote foresight and accountability. Shareholder proposals fulfill multiple, valuable services: risk assessment, communication channels, investor polling and honing of governance mechanisms.

LOW COST. The cost of printing a shareholder proposal on the company’s proxy statement is minimal. Even the costs associated with legally challenging a proposal can be minimal. 

RIGHTS, CONTRACTS AND RELATIONSHIPS. The right to file proposals is part of the bundle of rights and expectations associated with share ownership. Investing strategies, contracts, fiduciary duties and contractual commitments have been constructed around the right of investors, especially smaller retail investors, to be able to file proposals as part of an active investing strategy. Rulemaking by the SEC must not dilute these rights or disrupt these relationships.   

Investor Rights are at Risk

Threats to the Shareholder Proposal Process

Shareholder proposals indicate to a company the material concerns of its investor base. Corporate disclosure and decision-making are driven by the concept of materiality. Information is ‘material’ “if there is a substantial likelihood that a reasonable investor would consider it important in deciding how to vote, or to buy or sell a stock, or would view it as significantly altering the ‘total mix’ of information made available.” The level of investor support demonstrates for the company, board and management what the “reasonable investor” would view as material information for disclosure and action.

Shareholder proposals are one of the few opportunities that investors, including individual Americans saving for retirement or other needs, have to allow them to influence major policies at the companies that they own. Critics are working to take even this limited right away through actions such as:

  • Legislation passed by the House of Representatives in the 118th Congress giving companies sole discretion as to whether to exclude investor proposals from the proxy statement

  • A lawsuit brought by Exxon against its own shareholders to stop them from proposing a climate vote at a shareholder meeting

  • New staff interpretations of longstanding SEC regulation Rule 14a-8 making it harder for investors to ask for other investors to vote for proposals addressing material risks to the sustainable value of companies.

  • A letter written by 18 state attorneys general insinuating that major asset managers and banks were violating fiduciary duties and other legal obligations simply by considering climate and other social issues when voting proxies on behalf of clients.

  • A speech from a SEC Commissioner arguing for new rules that will disenfranchise smaller investors from accessing the shareholder proposal process.