Shareholder proposals have become a key instrument of shareholder voice in corporate America. Yet recent rule changes passed by the SEC—increasing the barriers to shareholder proposal submission—risk severely muting that voice. Not only does this harm shareholders, but the muting of shareholders’ voice has detrimental impacts to both stakeholders and our overall corporate governance system…With the rise of proxy advisors, a shareholder proposal is no longer just a PR attempt to direct attention to the issue at stake. Indeed, despite most often being drafted as non-binding resolutions, these proposals have become binding in practice with the power to implement important corporate governance policies. This is because proxy advisers such as ISS and Glass Lewis have made it clear that companies that do not act on shareholder proposals that receive a majority support will suffer voting consequences…Importantly, as Tel Aviv University professor Kobi Kastiel and I highlight in a recent study, shareholder proposals are one of the few areas in corporate governance that had not been ceded to large institutional investors, hedge funds, and the uber-rich. While many retail investors don’t even vote, individual investors submit the majority of shareholder proposals. In fact, in 2018, just five individuals accounted for close to 40 percent of all shareholder proposals submitted to S&P 1500 companies, and these same individuals submitted more than half of the proposals that received a majority of shareholder support in the same index. 

It is Not Just Small Investors Who Will Be Silenced Thanks to SEC’s New Rules – Pro Market