VEA Vice Chair appeared with a distinguished panel of investor advocates to brief Senate staffers this week on the SEC’s appalling new rule restricting shareholder proposals. The rulemaking process violated the Administrative Procedure Act and cost-benefit guidelines. Other panelists were Josh Zinner of ICCR, Brandon Rees of AFL-CIO, and Kyle Seeley of the New York State Common Retirement Fund. In her remarks. Minow emphasized the flawed rulemaking orchestrated by lobbyists. Rees pointed out that the “cost-benefit analysis” had costs from a 1990s “study” based on a limited number of self-reported expenditures and included no benefits whatsoever from the shareholder proposal process despite its own undisclosed evidence that they are substantial and quantifiable.
The Congressional Review Act gives Congress the authority to overturn regulations within a set time period. A group of pension plans, institutional investors, foundations, labor unions, religious organizations and consumer groups have written a letter asking Congress to use this authority. The full letter is attached below. An excerpt:
Commissioner Allison Herren Lee noted in her dissent that the SEC received thousands of letters “explaining why these changes are not in the interests of shareholders or in the long-term interests of the companies they own,” with letters in opposition far outnumbering those in support. “Individual investors, asset managers, pension funds and labor unions representing the interests of teachers, firefighters, and service employees, state and local governments, universities, religious institutions, numerous investor organizations representing trillions of dollars in assets under management, US Senators, academics, a Commissioner at the Federal Election Commission, state securities regulators, our own Investor Advisory Committee— shareholders of every ilk and many others wrote in overwhelming numbers to urge us not to adopt these amendments,” she added.…In order to cobble together a justification for the shareholder proposal rule amendments, the SEC greatly exaggerated the cost to companies of shareholder proposals and downplayed the impact on investors. Worse, the SEC refused to consider, and tried to suppress, data in its possession it could have used to better estimate the number of investors who would lose the ability to submit shareholder proposals under its new rules. Using this data, the SEC’s Division of Economic and Risk Analysis estimated that the proposed stockholding requirement of $25,000 for at least one year could exclude up to 51.18 million (77.55%) additional accounts. Although the SEC had that data when the SEC proposed the rule changes, it did not make it publicly available until August 2020, long after the public comment period had closed and just 40 days before the SEC voted to adopt the amendments. The Division of Economic and Risk Analysis also refused repeated requests from the Office of the Investor Advocate for access to that data.[footnotes omitted]