Shareholder Rights Under Attack: The Importance of SEC Rule 14a-8

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For over 45 years the shareholder proposal process has served as a cost-effective way for corporate management and boards of directors to gain a better understanding of shareholder priorities and concerns and to benefit from those insights on critical and emerging risks and opportunities.

And yet, there are efforts under way to curtail shareholder rights by changing the rules of the proxy process to make the filing of resolutions more onerous for investors. 

Most recently, the SEC’s Division of Corporation Finance issued a Legal Bulletin (Staff Legal Bulletin No. 141 (CF)) regarding Rule 14a-8, which governs our ability to file shareholder resolutions. The four relevant items in the November 1st Bulletin cover:

  • the scope and application of "ordinary business” exclusions;
  • the scope and application of "economic relevance” exceptions;
  • proposals submitted on behalf of shareholders (additional eligibility requirements); and
  • the use of graphs and images.

These changes may have an impact on shareholders’ ability to use resolutions as a tool to raise issues of environmental and social concern with corporate management.

In response to these and other recent challenges to the proxy process – including the Financial CHOICE Act, and changes proposed by the US Chamber of Commerce – ICCR has joined together with CERES, the Council of Institutional Investors, US SIF and PRI.

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.

Latest Update: On Thursday, November 9 the Council of Institutional Investors (CII) delivered to SEC Chairman Jay Clayton and Director of Division of Corporation Finance William Hinman a letter on behalf of CII, ICCR, Ceres and US SIF with an investor response to proposed changes from the US Chamber of Commerce on SEC Rule 14a-8.

Further Reading

The Business Case for the Current SEC Shareholder Proposal Process (a paper co-authored by ICCR, CERES and US SIF)
Background: The history of the Financial CHOICE Act

Harvard Business School: The House Wants to Squelch Voices of Small Shareholders
: GOP Plan May Signal End Of 'Socially Responsible Investing
Wall Street JournalInvestor Group, Pension Funds Oppose Financial Choice Act
Investment NewsHouse committee approves Dodd-Frank replacement bill that includes repeal of DOL fiduciary rule
ICCR Press Release (May 2017): Investor groups representing $65 trillion tell Trump Admin that current shareholder resolution process is working well to protect investors
Council of Institutional Investors Letter to the SEC