By Katanga Johnson
WASHINGTON (Reuters) -The U.S. Securities and Exchange Commission on Wednesday published new staff bulletins that may make it harder for corporations to exclude shareholder proposal on major social issues – such as race, diversity and climate changes – from corporate ballots.
The new bulletins replace Trump-era guidance that demanded companies take more steps to disclose how they craft their shareholder recommendations. Critics said that change aimed to stifle shareholders’ voices.
Shareholder voting rights have become a major bone of contention in recent years as more investors have pushed companies to take up social and environmental issues.
The SEC bulletin said staff would revise the way they determine whether a shareholder proposal relates to the ordinary business of a company – which is the general standard for assessing such proposals – including by considering whether it raises significant social policy issues.
It said its rules have always allowed an exception for considering whether proposals relate to issues that transcend the company’s daily business, but the new bulletin more explicitly clarifies how it would apply that analysis.
“Staff will no longer focus on determining the nexus between a policy issue and the company, but will instead focus on the social policy significance of the issue that is the subject of the shareholder proposal,” said the SEC bulletin published by the staff of the Division of Corporation Finance.
The agency’s rules require shareholders to present proposals for consideration in a company’s proxy statement.
The so-called “ordinary business” exception permits a company to reject a proposal that “deals with a matter relating to the company’s ordinary business operations,” and is often used to restrict shareholder meeting agendas from taking up problems with management and the board of directors.
The new SEC bulletin also comes ahead of an agency review of shareholder voting rule changes that SEC Chair Gary Gensler said he would consider to better oversee proxy advisers – firms that recommend to investors how to vote in corporate elections and cast ballots on behalf of some asset managers.
“The right to put proposals in front of other shareholders for a vote is an important part of the securities laws,” Gensler said in a statement.
“Today’s bulletin will provide greater clarity to companies and shareholders on these matters, so they can better understand when exclusions may or may not apply.”
(Reporting by Katanga Johnson in WashingtonEditing by Michelle Price and Jonathan Oatis)
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