As of Monday’s deadline for public comments on the SEC’s proposed restriction on shareholder rights, a broad group of investors has weighed in strongly against the SEC’s proposal to limit shareholders’ rights to file proposals for shareholders to consider and vote on at annual shareholders meetings.
Commenters opposing the new restrictions on shareholder rights nclude large investment funds, pension funds, religious institutions, foundations, investment managers, university endowments, individual investors and the SEC’s own Investor Advisory Committee. These investor letters describe in detail the immense benefits from many important ideas that originated with shareholder proposals that would not have been allowed if the SEC’s new restrictions had been in effect.
Many of these investors also criticized the SEC’s companion proposal to require independent proxy advisors to clear their advice with the subject companies before providing it to their investor clients. These investors lamented that corporate involvement in proxy advice will jeopardize the independence and reliability of a critical resource for investors to hold management accountable for delivering long-term shareholder value.
“Investors’ comments on the SEC proposals staunchly defended their rights to continue to file and vote on shareholder proposals, as well as to continue to obtain independent proxy voting advice,” said Sanford Lewis, Director of the Shareholder Rights Group. “The current changes, proposed by SEC Chair Jay Clayton and adopted on a 3-2 party-line vote, were not asked for by any investors. They are the result of an intense, multi-year lobbying campaign funded by corporate trade associations led by the Chamber and the Business Roundtable.”
As of the February 3 deadline, more than 14,000 comment letters have been filed and listed on the SEC’s website on the SEC’s proposed amendments to restrict shareholder proposals, including from more than 31 asset managers, 7 pension funds, 73 faith-based groups, 60 prominent scholars, 9 state or local government officials, 2 unions and several thousand individual investors. Numerous investor groups also filed letters opposing the SEC proposals, including:
● the Council of Institutional Investors (a nonprofit, nonpartisan association of U.S. public, corporate and union employee benefit funds, other employee benefit plans, state and local entities charged with investing public assets, and foundations and endowments with combined assets under management of approximately $4 trillion),
● US SIF: The Forum for Sustainable and Responsible Investment (with members comprised of investment management and advisory firms, mutual fund companies, asset owners, research firms, financial planners, advisors and broker-dealers, represent more than $3 trillion in assets under management or advisement),
● the Interfaith Center on Corporate Responsibility (a coalition of more than 300 faith-based institutional investors collectively representing more than $500 billion in invested capital),
● the U.N. Principles of Responsible Investing (an international network of 2,800 investor signatories that manage more than $90 trillion in assets, including more than 500 U.S. signatories managing more than $45 trillion in assets),
● the Shareholder Rights Group (an association of investors formed in 2016 to strengthen and support shareowners’ rights to engage with public companies on governance and long-term value creation).
Comments were also filed by several civil society groups, including Public Citizen, Green America, Oxfam and the Thirty Percent Coalition. More than 500 individual investors filed their own comment letters, and 13,000 additional individuals weighed in through petitions organized by As You Sow, Public Citizen and the Friends of the Earth.
Tim Smith of Boston Trust Walden, a member of the Shareholder Rights Group, stated, “We have seen an outpouring of investor opposition to these new restrictive rules coming from a significant cross-section of investors. The SEC’s role is to be the investor’s advocate, protecting investor interests. The message from these comments is clear that the SEC should put aside these two proposals that reflect a disturbing anti-investor bias.”
Since the 1940s, shareholder proposals have been a critical tool for investors to raise issues of concern at annual shareholders meetings and hold corporate CEOs and boards accountable to their owners. Proposals allow shareholders to speak to, inform and test the waters on an issue with their fellow shareholders. Over the last 50-plus years, shareholder resolutions have spurred numerous changes in corporate governance, policy and disclosure.
The investor comments filed in opposition to the SEC’s proposal reflect deep research, analysis and experience, and reveal serious flaws in the SEC’s analysis and economic justification.
The Shareholder Rights Group (SRG) is distributing this information on behalf of its members as well as numerous other investment organizations affected by the rulemaking proposals.
For more information visit www.investorrightsforum.com.
Timothy Smith, Boston Trust Walden, TSmith@bostontrustwalden.com, (617) 726-7155
Susana McDermott, Interfaith Center on Corporate Responsibility, firstname.lastname@example.org, (212) 870-2938