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Regulation and Compliance > Federal Regulation > SEC

Shareholders Should Be Heard, Not Muzzled

By Fran Teplitz

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The Securities and Exchange Commission is attempting to bar many investors from pushing corporations to address major issues, including climate change, lobbying and election spending transparency, human rights abuses and discrimination. This would be a huge setback not just for those shareholders, but all of us who benefit from the progress they help to bring about.

The SEC wants to make it more difficult for concerned shareholders to file proxy resolutions initially and for reconsideration after a first year’s vote. The SEC proposal would increase the stock ownership threshold for shareholder proposals to $25,000 from $2,000 for shares held for a year, which flies in the face of the SEC’s claimed support for the “main street individual investor.”

The SEC rule change seeks to increase the percentage of support a shareholder resolution needs to be submitted for consideration, which is problematic for any new and cutting-edge issues. The proposal also would limit investors or their representatives to one shareholder resolution per shareholder meeting and require investors to be available for dialogue with corporate management even when they have hired financial professionals for their shareholder advocacy.

This may sound like “inside baseball” of concern only to active shareholders, but the truth is that the SEC proposal should scare every American because it undermines our notion of democracy. There is no democracy for shareholders in America unless they have a right to engage in meaningful shareholder advocacy and to be heard. Moreover, recent analysis by the Sustainable Investments Institute shows that if the SEC rule were to be implemented, the proposals that would be most restricted would be those addressing corporations’ political activity. The SEC rule thus threatens not only shareholder democracy, but our country’s democracy.

Proxy Comments

Thousands of comment letters opposing the rule change, including over 10,000 from Green America members, have flooded into the SEC. Investors object to the rule change because it would weaken the ability to hold corporations accountable, conflicts with the SEC’s mandate to protect investors and infringes on religious liberties.

Some of the biggest corporate progress made in recent years — in terms of pollution, climate change, workplace conditions, tobacco sales and a host of other issues — has come about as a result of two strategies, both of which Green America employs: outside pressure from consumers and activists groups and inside pressure from concerned shareholders.

Consider the current issue of gender pay equity: In the last three years, shareholder advocates have pressured two dozen major U.S. banks and tech giants, including Citi, Wells Fargo, Apple, Alphabet/Google and many others, to disclose their equal-pay data. Shareholder resolutions in the 1970s and on were an important part of the process of ending the U.S. corporate support for apartheid in South Africa. Even as corporations blinded by short-term profits were unable to see the risks posed to shareholders, shareholder advocates pressured GM and other corporations to pull out of an economy run by a racist regime. Why in the world would the SEC want to short-circuit a process that helped bring about the end of apartheid?

The current shareholder resolution process is not burdensome. In fact, the average company receives only one shareholder proposal every seven years. Americans are right to wonder why the SEC, charged as it is with a mission to “promote a market environment that is worthy of the public’s trust,” is choosing to side with corporations against the public interest.

Large and small investors have an important role to play in identifying and seeking action on risks that corporate decision-makers are either unaware of or deliberately ignoring. These risks, if unheeded, can gut individual companies and undermine the larger economy. Just look at all the newspaper headlines about corporations being socked with billions of dollars in fines, penalties and court judgments for pollution, sexual discrimination, cancer-causing products, and more. We need more shareholder advocacy and more of the corporate accountability it fosters, not less.

Fran Teplitz is the executive co-director for Business, Investing and Policy at Green America, the nation’s leading green economy organization.

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