Shareholder Rights Threatened
As some of you may know by now, word has been circulating about potential rule changes at the federal Securities and Exchange Commission (SEC) that could dramatically alter the rights of shareholders to file advisory resolutions with the corporations in their portfolios.
Today during the SEC’s open meeting, they will disclose just what–if any–changes will be proposed. MMA, along with the entire socially responsible investment community has been active for weeks, contacting the SEC, members of Congress, and other institutional investors regarding the significant negative impact we believe such changes could have. You can view a copy of a press release outlining this situation from the Social Investment Forum by clicking here.
Why is this such a big deal for investors? The rule under consideration, 14-a-8 of the Securities and Exchange Act of 1934, governs the ability of shareholders to file advisory (or precatory) resolutions on the annual proxy statements of the corporations of which they are part owners. Over time this has proven to be a relatively efficient, well-governed process facilitating meaningful dialogue between the company and concerned investors. Over the past 40 years in particular, this Rule has been the basis for transformative company-shareholder engagements yielding dramatic and creative solutions to issues of social, environmental, corporate governance and financial performance. In fact, in recent years, and based on this fundamental right and history, we’ve seen leading companies position themselves to proactively work with shareholders on these issues–declaring that doing so has yielded results that benefit our planet and company shareholders. There is no guarantee that such wisdom would continue to prevail, should this foundational right be lost or substantially weakened.
It is true that we have seen a dramatic increase in the filing of shareholder resolutions in recent history, lending some credence to corporate complaints that this process is an increasing burden and financial drain. This is certainly true at outlier companies like Exxon and Wal-Mart who are now seeing upwards of 8 and 10 resolutions annually. However, I would propose that this increase merely parallels the upswing in corporate malfeasance and scandal, as well as growing evidence that modern corporations have become the prevailing social structure effecting the health and well-being of our planet and its people. The growth in shareholder advocacy pails in comparison to the consolidation of wealth, political power, and market dominance we’ve seen in the global corporate community.
So whether shareholder advocacy is your thing or whether you agree with every shareholder resolution you’ve ever read (I certainly haven’t), I hope we can all agree that the RIGHT of shareholders (regardless of their size) to raise appropriate–if not universally shared–issues is important to all of us.
