A group of investor rights organizations (collectively, the "Organizations") urged the SEC to reopen the comment period for proposed amendments to SEC rules on shareholder proposals (see previous coverage) in light of recently submitted data from the SEC Division of Economic and Risk Analysis.

The Council of Institutional Investors, the Shareholder Rights Group, Ceres, Principles for Responsible Investment, the American Federation of Labor and Congress of Industrial Organizations, US SIF: The Forum for Sustainable and Responsible Investment, and the Interfaith Center on Corporate Responsibility requested that the SEC reopen the comment period regarding the SEC's proposed amendments to Rule 14a-8 ("Shareholder Proposals"), which would raise the eligibility thresholds for a shareholder wishing to submit a proposal (i.e., how many shares a shareholder must have and how long a shareholder must have held them). The Organizations reiterated their previous comments that "shareholder proposals and proxy voting are economically important mechanisms for shareholders to monitor and hold corporate managements accountable to create and protect long-term value."

The Organizations' request was made in light of recently published data from the SEC Division of Economic and Risk Analysis (or "DERA"), which indicated that the proposed amendments could significantly reduce the number of retail investors that are eligible to file a proposal to be put up to a proxy vote. In the joint comment letter, the Organizations asserted that the recently disclosed data is of material importance to the public's understanding of the impact of the proposed amendments. As such, they stated that the SEC did not adhere to its Current Staff Guidance on Economic Analysis in SEC Rulemakings, which requires the economic analysis accompanying a rule proposal to "clearly address contrary data."

Commentary

The significance of the data is not obvious. However, by their joint letter, the investor rights advocates demonstrate that a significant number of shareholders want to maintain a liberal ability of small shareholders to put up proposals for a vote. This raises the question: if the shareholders of each issuer could vote on the rules applicable to that issue, what range of standards would be adopted by the shareholders themselves?

Primary Sources

  1. Group Comment Letter on Improper Exclusion of Evidence on Impact of Proposed Amendments to Rule 14a-8 on Retail Investors
  2. SEC DERA Memo: Analysis of Data Provided by Broadridge Financial Solutions, Inc.

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