Proposed Shareholder Resubmission Thresholds: Disproportionate Effect?
That's what a recent report issued by the Council of Institutional Investors says. A lot has been said about the SEC's proposed rules relating to the shareholder proposal process, including changes to the submission and resubmission thresholds — John blogged a while back about some of the colorful comment letters, and one story says that the SEC was flooded with over 13,000 comment letters. CII's report examined shareholder proposal data from 2011 through third quarter 2019 and found that, had the proposed resubmission thresholds been in effect, certain proposals would have been excluded more than others.
Here's some of CII's findings:
– CII estimates the 5/15/25 resubmission thresholds, paired with the 10% momentum requirement, would have more than doubled the number of proposals excluded
– Unlike the proposed higher thresholds, the new momentum requirement would have impacted governance proposals considerably more than environmental or social proposals
– Overall, CII's study showed that proposals requiring independent board chairs and those relating to political contributions and lobbying were the types of proposals that would be most impacted by the proposed rules – meaning more frequently excluded from proxy statements
It's not necessarily surprising that the new resubmission thresholds potentially increase the number of proposals that would be excluded, although it's interesting that this study shows it would impact governance proposals more than others. At this time, it's not certain the Commission will approve the rules as proposed or whether further changes are on the horizon.
-Lynn Jokela, TheCorporateCounsel.net May 12, 2020