The SEC has voted to raise the threshold for shareholder proposals to be included in a company’s proxy statement.
The amendments to Section 14A-8 of the Securities and Exchange Act of 1934 require that a shareholder own at least $2,000 worth of stock for three years to sponsor a first-time proxy proposal, up from one year currently.
A shareholder could also submit a proposal if he or she or an institution like an endowment owned $25,000 worth of stock for one year or $15,000 for two years.
Proxy proposal resubmissions, which allow proposals the time to gather momentum, also face tighter restrictions under the new regulations. A minimum 5% vote is required for a first resubmission in the following five years, up from 3%. Proposals resubmitted twice or three or more times in the prior five years would require minimum votes of 15% and 25% in support, respectively, in the following three years, up from 6% and 10%.
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(Related: SEC Approves Proposed Proxy Rule Changes)
The new rules will take effect 60 days after publication in the Federal Register and apply to any shareholder proposals submitted for an annual or special meeting held on or after Jan. 1, 2020. They were first proposed in November 2019.
SEC Jay Clayton, in a statement, said the amendments “ensure there is an appropriate alignment of interests between shareholder-proponents and their fellow shareholders and illustrate again why retrospective review and, as appropriate, modernization of our rules is necessary.”
The rules had not changed much since amendments approved in 1954 and 1998.