In what is being seen by investors as a major setback for corporate transparency and shareholder democracy, the SEC announced on September 23, 2020 the imposition of new rules severely restricting shareholders’ access to the corporate proxy by limiting the filing of resolutions. The SEC’s move comes after years of lobbying by powerful industry trade associations that have sought to limit shareholder engagement with corporations on critical environmental, social, and governance issues.
The new rules will significantly limit investors’ ability to submit these proposals by raising the thresholds of ownership both in terms of the number of shares and length of time they must be held. Before the new rule, a shareholder who has held shares in a company for at least a year needed to hold at least $2,000 in shares. Under the new rule, new purchasers of stock must hold $25,000 in shares for at least a year, or hold $2000 in shares for at least three years.
In addition, the new rules make it much more difficult to refile a proposal that has been voted on. The prior rule required 3% support on a first-year vote, 6% on a second vote, and 10% on a third vote to keep a proposal before a company’s shareholders. Now resubmission will require 5% on a first vote, 15% on a second vote and 25% on a third vote. This will stifle deliberation by shareholders on emerging issues.
Timeline of the Investor Campaign to Preserve Rule 14a-8:
ICCR has joined together with the Investor Rights Forum, CERES, the Council of Institutional Investors, US SIF, PRI, and other stakeholders to defend shareholder rights. Together, we are pressing key decision makers to preserve Rule 14a-8 in its present form, as the most effective and efficient means for shareholders to communicate with boards of directors, corporate management, and their fellow shareholders.
ICCR Statements and SEC Submissions:
- In April of 2022, ICCR issued a comment letter on a proposed SEC rule on transparency and conflicts of interest in the private equity industry.
- In March of 2022 ICCR commended the SEC for issuing a nuanced proposal on mandatory climate risk disclosure.
- In June of 2021, ICCR issued a comment letter making the case for mandatory climate risk disclosure.
- In December of 2021, ICCR, As You Sow and James McRitchie responded to the SEC's opposition to our motion for summary judgement.
- In December of 2021, ICCR Commended the New DoL ERISA Rule
- In September of 2021, The Council of Institutional Investors filed an Amicus brief in support of plaintiffs ICCR, As You Sow and James McRitchie. You can read the plaintiff's September 2021 motion for summary judgement here.
- In June of 2021, ICCR, As You Sow and James McRitchie filed a lawsuit to overturn the SEC's revisions to rule 14a-8. Read the press release here.
- In April of 2021 ICCR joined a coalition of investors in sending a letter to Congress urging support for a resolution that has been introduced in both the House and Senate (S.J. Res. 16 / H.J. Res. 36) under the Congressional Review Act (CRA) that would repeal the restrictive changes to rule 14a-8 that were passed by the SEC during the Trump administration.
- February 2, 2021 - ICCR and the Shareholder Rights Group made public a letter they sent to acting SEC Chair Allison Lee urging the agency to repeal guidance written under the prior administration that made it easier for companies to block shareholder proposals from appearing on company proxies.
- December 2020 - ICCR and the Shareholder Rights Group presented a briefing to the Biden Transition Securities Regulation Team in December highlighting the need for redirection of the no-action process and repeal of Staff Legal Bulletins 14I, 14J, and 14K to re-enable shareholders to ask their investee companies to improve disclosure and performance on climate change. The investors say the arguments made in the briefing are consistent with the principles and views expressed in Chair Lee’s November 5, 2020 speech “Playing the Long Game: The Intersection of Climate Change Risk and Financial Regulation”, notably that climate change represents a systemic risk to financial markets.
- October 5, 2020 - ICCR releases comment letter on the Department of Labor's proposed changes to fiduciary standards under ERISA.
- September 23, 2020 - ICCR issues press release on SEC Rule change.
- September 23, 2020 - The SEC revises Rule 14a-8, blocking most investors' ability to file proxy proposals.
- September 4, 2020 - ICCR, along with CII, the Shareholder Rights Group, Ceres, US SIF, PRI and the AFL-CIO submitted a letter the SEC arguing that evidence of the impact of the SEC's proposed amendments to Rule 14a-8 on retail investors was improperly excluded.
- August 19, 2020 - ICCR, along with CII, the Shareholder Rights Group, the NY State Common Retirement Fund, Ceres, and As You Sow submitted a letter the SEC outlining how SEC staff have recently broadened the range of proposals that are considered excludable under ordinary business and substantial implementation interpretations, eliminating or threatening to eliminate many long-standing types of proposals.
- July 30, 2020 - ICCR, along with CII, the Shareholder Rights Group, Ceres, AFL-CIO, US SIF and the Sustainable Investments Institute, submitted case studies and a comment letter to the SEC. Read the related press release here.
- July 30, 2020 - ICCR letter regarding Department of Labor proposed rule 'Financial Factors in Selecting Plan Investments'
- July 6, 2020 - ICCR letter on virtual and hybrid AGMs - Concerns from the 2020 season
- June 22, 2020 - Investors issue protocols for 2021 AGM season
- April 30, 2020 - Comment Letter on Weight of Investor Opposition to SEC Proposals
- April 21, 2020 - Investor letter to AT&T regarding virtual AGMs.
- February 6, 2020 - ICCR Press Release following closure of the SEC Comment period - Investors Overwhelmingly oppose SEC's move to restrict shareholder rights
- January 27, 2020 - ICCR's submission to SEC Secretary Countryman arguing against the proposed amendments to rule 14a-8. Read US SIF's submission. Read the Council of Institutional Investors' submission. Read the Shareholder Rights Group's submission.
- November 5, 2019 - ICCR Press Release on SEC Proposed Changes to Rule 14a-8
- November 5, 2019 - ICCR CEO Josh Zinner's Blog on Proposed SEC Changes
- November 5, 2019 - ICCR and the Shareholder Rights Group submitted a fact sheet to the SEC Debunking Myths And Disinformation Regarding Shareholder Proposals. See the letter here.
- October 25, 2019 - Potential Rulemaking on Shareholder Proposal Filing and Resubmission Thresholds Letter from Shareholder Rights Group, ICCR, CII, USSIF, UNPRI to Chairman Clayton.
- September 19, 2019 - ICCR, CII, USSIF, Ceres and the Shareholder Rights Group send letter to SEC criticizing new policy on Staff guidance
- September 9, 2019 - ICCR's CEO Responds to New SEC Guidance
- August 29, 2019 - ICCR's CEO Responds to the Business Roundtable's inconsistencies about shareholder rights. Read the letter here.
- May, 2017 - ICCR Press Release: Investor groups representing $65 trillion tell Trump Admin that current shareholder resolution process is working well to protect investors
- April, 2017 - The Business Case for the Current SEC Shareholder Proposal Process (a paper co-authored by ICCR, CERES and US SIF)
Press Coverage/Further Reading
Articles related to the SEC lawsuit:
- Reuters: Investors sue U.S. regulator over Trump-era AGM resolution rules
- Newsweek: American Express, GE, ExxonMobil, smacked by shareholders over diversity, climate change
- Forbes: What you need to know about the 2021 Proxy Season
- Morningstar: SEC sued by shareholders
- Financial Times: Nuns sue SEC to stop shareholder proposal rule
- FT Agenda: Shareholders defy SEC on proposal rule
- NY Times: The tug of war over corporate transparency
- Politico: Investors sue SEC over Trump-era rule restricting shareholder votes
- Bloomberg Law: Shareholder rule change ‘flawed at every turn,’ investors say
- Responsible Investor: Investor groups take US regulator to court over plans to make it harder to file shareholder resolutions
- Law 360: Investors want SEC's 'flawed' shareholder rules scrapped
- JD Supra: Investors sue to invalidate Rule 14a-8 amendments
- Law.com: Suit claims new SEC rule “guts” shareholder proposals
Articles related to the SEC's rule changes:
- August 17, 2020 - Responsible Investor - SEC's proposed shareholder regs? Drop them in the public interest
- August 3, 2020 - CQ News - Investor groups Resist SEC Rule Change on Shareholder Proposals
- June 25, 2020 - Members of Congress Oppose Changes to Rule 14a-8 - Read Maxine Waters', Chairwoman of the House Committee on Financial Services, letter to the SEC. Read Senator Chris Van Hollen's letter.
- April 24, 2020 - Barron's - New SEC 14a-8 rules will hobble ESG investors
- February 3, 2020 - Business Wire - 18,000 signatures delivered urging SEC not to muzzle the voice of shareholders
- December 10, 2019 - Oxfam - The SEC Wants to Make it Harder to Hold the Powerful Accountable
- November 19, 2019 - Bloomberg - SEC Chairman Cites Fishy Letters in Support of Policy Change
- November 15, 2019 - Bloomberg - Silencing the Nun: SEC Aims to Curb Small Investors' Activism
- September 30, 2019 - JD Supra: Will Corp Fin's new policy for adderssing shareholder proposals lead to more litigation?
- September 21, 2019 - Harvard Law School Forum on Corporate Governance and Financial Regulation, No Action Process—Letter from Five Investor Organizations to SEC Division of Corporate Finance
Additional Background: The history of the Financial CHOICE Act