Congressional Review Act seen as mechanism to repeal anti-investor amendments and restore SEC’s role as investor advocate.
NEW YORK, NY, THURSDAY, APRIL 22ND, 2021– A group of nearly 200 organizations comprising pension funds, asset managers, foundations, labor unions, religious organizations and consumer groups today announced a letter they sent to all members of Congress urging support for invoking the Congressional Review Act (CRA) as a means to overturn SEC rule amendments set in motion during the Trump administration.
CRA resolutions of disapproval were introduced in the House (H.J. Res. 36) and Senate (S.J. Res. 16) by Senator Sherrod Brown of Ohio and Representative Michael San Nicolas of Guam to repeal recent amendments to SEC rules that would severely limit the ability of shareholders to file resolutions on key environmental, social, and governance issues.
The new rules, which govern the interaction of investors with board and management via the shareholder proposal process, impose onerous thresholds in terms of the number and length of time of shares owned, as well as the votes needed for the resubmission of proposals.
“The rule amendments were adopted on a partisan vote, in clear violation of the SEC’s own requirements for economic analysis, and despite overwhelming opposition from investors, with the express purpose of limiting the say investors have in the operations of the companies they own,” said Barbara Roper, Director of Investor Protection at the Consumer Federation of America. “All of this makes the rule a perfect candidate for CRA disapproval.”
SEC Commissioner Allison Herren Lee, in dissenting with the new rules said, “These amendments will restrict shareholders’ ability to oversee and engage with management of the companies they own. They do not properly value shareholder proposals or shareholder rights. And they will restrain shareholder efforts on issues that are of pressing importance to them and to our broader economy.”
“The narrow self-interest of corporate CEOs who oppose the shareholder proposal process should not come before the value for investors that shareholder proposals create,” said Brandon Rees, Deputy Director, Corporations and Capital Markets at the AFL-CIO.
According to the letter:
In amending the shareholder proposal rule, the SEC ignored evidence that shareholder proposals deliver significant benefits for all shareholders. Many corporate best practices have been adopted in response to shareholder proposals including policies on board independence, board diversity, majority voting, limits on golden parachutes, respect for human rights, and sustainability reporting. Shareholder proposals often are the best mechanism for shareholders to elevate neglected issues facing a company that could prove costly, even an existential risk, if the board and management continue to neglect them. Shareholder proposals encourage companies to adopt changes that protect and increase economic value. They provide a cost-effective way for management to better understand the views of its entire shareholder base. They also serve as an early warning of issues that could pose a significant reputational risk to the company.
"With existential issues facing America's corporations, stifling shareholder proposals and the shareholder voice is certainly not in the interest of U.S economy or its investors,” said Sanford Lewis, Director of the Shareholder Rights Group. “Shareholder proposals allow investors to engage with their companies on critical risk management and governance challenges.”
“Corporations have improved their performance and set best practice examples for their peers in response to shareholder proposals,” said Bryan McGannon, Director of Policy and Programs at US SIF: The Forum for Sustainable and Responsible Investment. “The conversation between investors and the companies they own facilitated by the proxy process should be encouraged, not discouraged by the SEC.”
“If not overturned, these rules will profoundly restrain shareholder efforts on issues that are of pressing importance to us and to our broader economy,” said Josh Zinner, CEO of the Interfaith Center on Corporate Responsibility. “Congress has an opportunity to undo this damage and restore an important component of shareholder oversight and corporate accountability. They must endorse the CRA as a mechanism to accomplish this.”
About the Interfaith Center on Corporate Responsibility (ICCR)
Currently celebrating its 50th year, ICCR is the pioneer coalition of shareholder advocates who view the management of their investments as a catalyst for social change. Its 300-plus member organizations comprise faith communities, socially responsible asset managers, unions, pensions, NGOs and other socially responsible investors with combined assets of over $US 2 trillion. ICCR members engage hundreds of corporations annually in an effort to foster greater corporate accountability. Visit our website www.iccr.org and follow us on Twitter, LinkedIn and Facebook.
Director of Communications
Interfaith Center on Corporate Responsibility