SEC Proposes Changes to Shareholder Proposal Rules and Those Governing Proxy Advisors

By Steve Quinlivan, Bryan Pitko and Jaclyn Schroeder

Stinson has prepared an analysis of proposed rules recently adopted by the SEC at an open meeting on November 5. SEC Commissioners voted 3-2 to propose potentially significant changes to the shareholder proposals process under Rule 14a-8 with respect to the bases upon which issuers can seek to omit shareholder proposals from their proxy materials. 

The proposed amendments to the shareholder proposal process under Rule 14a-8 would:

  • Institute a “tiered approach” for demonstrating sufficient ownership of securities to submit a proposal
  • Require specified documentation for proposals submitted by a shareholder representative
  • Obligate shareholder proponents to engage with the company with respect to the shareholder’s proposal
  • Restrict a person to the submission of only one proposal for the same shareholders’ meeting
  • Raise the shareholder support thresholds for resubmitting a proposal
  • Allow companies to exclude proposals under certain conditions where shareholder support for the issue has declined

In addition, the SEC separately adopted proposed rules directed toward proxy advisors such as ISS and Glass Lewis, which the SEC refers to as proxy voting advice businesses. The proposed rules:

  • Provide for enhanced disclosure of conflicts of interests by proxy voting advice businesses
  • Require that registrants be given the opportunity to review and comment on proxy voting recommendations in certain circumstances
  • Permit registrants to include a hyperlink in the proxy voting recommendation setting forth the registrant's position on the proxy voting advice
  • Clarify the application of the SEC's antifraud rules to proxy voting recommendations and provide examples of what may be misleading information
  • Codify previous SEC interpretations to make clear that the terms “solicit” and “solicitation” include any proxy voting advice that makes a recommendation to a shareholder as to its vote
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