But Wait! There’s More! SEC Proposes to Tighten Shareholder Proposal Thresholds
Because one highly controversial proposal wasn’t enough, the SEC also announced a rule proposal yesterday that would make it more difficult for shareholders to submit & resubmit proposals for inclusion in a company’s proxy statement. The rule proposal would, among other things:
– Amend Rule 14a-8(b) to replace the current $2,000/1% ownership for at least 1 year threshold with 3 alternative thresholds for submission: continuous ownership of at least $2,000 of the company’s securities for at least 3 years; at least $15,000 of the company’s securities for at least 2 years; or at least $25,000 of the company’s securities for at least 1 year.
– Amend Rule 14a-8(c) to apply the one-proposal rule to “each person” rather than “each shareholder,” which would effectively prohibit a shareholder-proponent from submitting one proposal in their own name and simultaneously submit another proposal in a representative capacity. Representatives would also be prohibited from submitting multiple proposals, even if the representative were to submit each proposal on behalf of different shareholders.
– Amend Rule 14a-8(i) to increase the current thresholds of 3%, 6% and 10% for resubmission of matters voted on once, twice or three or more times in the last five years to 5%, 15% and 25%, respectively. A new provision would also be added permitting exclusion of a proposal that’s received 25% approval on its most recent submission if it has been voted on 3 times in the last 5 years and both received less than 50% of the votes cast and experienced at least a 10% decline in support.
Other proposed changes to Rule 14a-8(b) would subject shareholders using representatives to enhanced documentation requirements with respect to the authority of those agents, and require shareholder-proponents to express a willingness to meet with the company and provide contact & availability information.
I’ve already noted the reaction of individual SEC commissioners to these two proposals, but outside commenters had plenty to say as well. For instance, the CII decried the proposals as apparently “intended to limit shareholders’ voice at public companies in which they invest,” while the U.S. Chamber of Commerce hailed them for ensuring that “investors will have access to transparent and unconflicted proxy advice as well as improv[ing] the proxy submission process.”
-Liz Dunshee, CompensationStandards.com November 6, 2019
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