In 2016, House Financial Services Chair Jeb Hensarling (R-TX) introduced a bill called the “Financial CHOICE Act”. Section 844 of the Act includes proposed changes to SEC rule 14(a)(8), the rule which governs shareholders’ rights to file resolutions. Among its proposed changes were:
- unduly restricting the financial requirements of filing a shareholder resolution (from $2,000, to 1% of a company's stock);
- increasing the length of time an investor must hold shares from one year to three; and
- increasing refiling thresholds (to 6%, 15%, 30% -- up from 3%, 6% and 10%).
These changes would have had the effect of preventing all but the largest shareholders from submitting proposals for the proxy: average and smaller investors would effectively be silenced.
The Act was instigated by lobbyists employed by the CEO group the Business Roundtable (BRT), led by JP Morgan Chase CEO Jamie Dimon, whose members include General Electric, Walmart and Dow.
Dimon and the BRT oppose what they perceive to be “self-serving shareholder activity and proposals not intended to benefit the company”. Investors argue that the Choice Act would seriously weaken their ability to assess corporate performance against peers and exercise oversight of the companies they own. In impeding shareholder requests for greater transparency around the business risks they believe are material to their investment decisions, responsible investors caution against a return to pre-2008 risk-taking and short-termism which will end badly for not only shareholders, but the economy and society at large.
ICCR, along with other investor organizations including Ceres, CII, USSIF, and PRI sent a letter to Gary Cohn, director of the National Economic Council urging opposition to the Act (available here). ICCR member Domini Impact Investments recently wrote to the CEO of Nasdaq, criticizing Nasdaq’s endorsement of the Financial CHOICE Act, Section 844 in particular.
On June 8, the Act went to a full vote of the House, passed, and moved to the Senate where it is currently inactive. You can follow its status here.