Proposed changes to the current shareholder proposal process would restrict an important avenue that investors use to manage risks and respond to emerging trends, said Ceres CEO and President Mindy Lubber.
The rule proposed by the U.S. Securities and Exchange Commission (SEC) would limit investor’s ability to file proposals by increasing the share ownership requirements for filing and the percentage of votes a proposal needs before it can be resubmitted. It also would eliminate the longstanding practice of investors to pool their shares to meet filing thresholds. Furthermore, the rule would make recommendations from proxy advisory firms, who are hired by investors, less objective.
“The SEC’s proposed changes to the shareholder proposal process are misguided and will take away an important resource for investors to manage all kinds of financial risks, from climate change to cybersecurity, to human rights,” added Lubber. “The current process is working and serves the agency’s core mission of allowing investors of all sizes, in search of reliable financial information, to seek that information in a consistent and uniform manner. There is no compelling reason for this change and every reason to leave the system intact — It has worked for decades.”
Today, the SEC voted 3-2 to officially propose the new rule. The shareholder proposal process has worked well for more than a half century and promotes constructive dialogue between between investors and the companies they own. Last year, 45% of environmental, social and governance related shareholder proposals filed were later withdrawn because they led to effective engagements between investors and corporate management on commitments to performance improvements.
“The current process is transparent, efficient and overseen effectively by the SEC and a crucial tool for informing investors of material risks - risks that impact their portfolios,” Lubber added.