The new rules governing the shareholder resolution process announced today by the Securities and Exchange Commission (SEC) provide no benefit to investors. In fact, they will shelter corporate managers from accountability to shareholders. The Commission offered no evidence that shareholder resolution process is broken. This is a fix for a non-problem.
The shareholder resolution process has provided benefits to investors and companies by raising areas of risk to corporate boards and management. There is clear evidence that by raising such issues as climate change, board diversity, and executive compensation, shareholders have strengthened board oversight of these key areas of risk and opportunity.
The SEC’s proposed rulemaking would raise the thresholds for the filing and resubmission of shareholder proposals along with other changes in the process. According to the Investor Rights Forum, “For over half a century, the shareholder proposal process has aided investors of all sizes to convey key concerns to company directors and managers as well as fellow shareholders. The shareholder proposal process often sheds light on issues neglected by boards, leading to better-considered strategic decisions and more transparency.” Furthermore, the resolution process provides an easy and inexpensive way for boards to assess the views of their shareholders on an array of important issues.
Over 14,000 comments on the rules were submitted to the SEC, the vast majority of which opposed the changes [1]. Nearly all investors opposed the new rules. The SEC’s mission, according to its website, is “to protect investors.” Nowhere does it say its purpose is to make life easier for corporate managers.
Despite small changes to the rules originally proposed in November 2019, the UUA remains adamantly opposed to these changes. We stand by our comment letter submitted to the Commission on January 28, 2020. The new rules hurt investors and shield corporate management from accountability.
Tim Brennan
Special Advisor on Responsible Investing
Unitarian Universalist Association
tbrenan@uua.org