By Jessica DiNapoli
NEW YORK (Reuters) – The U.S. Securities and Exchange Commission voted 3-2 on Wednesday to make it tougher for shareholders to push companies on issues such as climate change, social justice and diversity, with Democratic commissioners dissenting against the move.
The rule, first proposed last November, raises the bar on how long investors have to hold $2,000 worth of stock before they can submit a shareholder proposal to be included on the company’s annual ballot and how much support they must receive before resubmitting it.
The guidelines on how much support proposals must receive to be resubmitted have not changed since 1954.
“Going forward, anyone who wants to invest in a company and establish the ability to submit a proposal has to hold it for longer,” SEC Chairman Jay Clayton said in a news briefing on Tuesday. “That’s not much of an incremental cost.”
Caroline Crenshaw, a Democrat and the newest SEC commissioner, said many proposals related to the COVID-19 pandemic and climate risk will now no longer make corporate ballots.
“These issues are material to performance and shareholders are increasingly using their vote to hold companies accountable for addressing these issues,” Crenshaw said. “Today’s rule amendments unnecessarily interfere with, and may chill, the live debate over these issues.”
The SEC, which received blowback from many investors on the rule, moved away from a contentious change that would have allowed companies to exclude proposals that received falling levels of support, a development Reuters reported first. The SEC felt that change was “not necessary,” an official said on background.
Corporate lobbying groups, including the U.S. Chamber of Commerce, have pushed to rein in shareholder proposals and have argued that the bar for resubmitting them should be higher in order to stop niche issues with diminishing levels of support from clogging up company ballots.
The Chamber commended the SEC for the change, saying the old rule “allowed special interest activists to push narrow agendas unrelated to the success of public companies and investor return.”
SEC officials said dealing with shareholder proposals is relatively expensive for companies as compared to the rest of the investor base. They added that most of the proposals come from a small group of repeat filers.
“While we all have a right to get on our soapboxes, we have no right to force others to pay for them,” said Commissioner Elad Roisman, who supported the new rule and spearheaded it.
(Reporting by Jessica DiNapoli in New York; Editing by Jonathan Oatis and Paul Simao)
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