Big corporations are trying to silence their own shareholders – The Washington Post

David H. Webber, professor at the Boston University School of Law, writes about efforts funded by corporations to reduce the number of shareholder proposals. Note that a very small number of these proposals are filed each year, at a very small percentage of companies, and that even a 100 percent vote in favor is almost never binding on management. And yet, somehow advisory votes by shareholders are so terrifying that the snowflakes in the corporate boardroom get the vapors even thinking about them.

Corporate lobbyists at the Business Roundtable — led by JPMorgan Chase chief executive Jamie Dimon — are heralding an effort to sharply limit the ability of investors to have a say in their companies through shareholder proposals. If successful, it will reduce stockholders’ ability to shape the companies they own and hold corporate managers accountable. As with political voting rights, these corporate voter-suppression efforts demonstrate that even the most basic rights need constant vigilance to protect them.Shareholder proposals — governed by the Securities and Exchange Commission — allow shareholders to suggest ideas to be voted on by their peers at the annual meeting. As with voter-suppression tactics generally, the Business Roundtable would not eliminate shareholder proposal rights. Tactically, that would be too crude. Instead, it would interpose a series of technical requirements that would have the same effect as a ban. Most notably, the Roundtable would drastically raise the ownership threshold needed to file a proposal.But shareholder proposals are effectively tools for significant corporate change, akin to ballot initiatives that have played such an important role in American democracy. In recent years, shareholder proposals have called for better assessment and disclosure of climate change risks and for improved diversity in hiring….A recent SEC study shows that New York City’s efforts [to get companies to adopt proxy access provisions] led to a total increase of $10.6 billion in shareholder value at targeted companies…Even when unsuccessful, shareholder proposals can become important mechanisms for registering discontent and helping companies adjust policy…Shareholder proposals mainstreamed diversity as an investment issue, recently pounced on by State Street — a traditional investment house with $2.5 trillion in assets under management — which adopted a new voting policy favoring women board members, symbolically underscored by the company’s commission of the “Fearless Girl” sculpture on Wall Street….None of this is to say that shareholder proposal rules are perfect. Certain revisions might be worth considering. But nothing justifies the stratospheric threshold that Dimon and the Roundtable are backing. Apparently, they’re not interested in protecting shareholders — only in protecting themselves.

Source: Big corporations are trying to silence their own shareholders – The Washington Post

Proxy Access Update: Sidley Austin

From Holly Gregory’s Sidley Corporate Governance Report:

Through the collective efforts of large institutional investors, including public and private pension funds, and other shareholder proponents, shareholders are increasingly gaining the power to nominate a portion of the board without undertaking the expense of a proxy solicitation.

By obtaining proxy access (the ability to include shareholder nominees in the company’s own proxy materials), shareholders will have yet another tool to influence board decisions. Approximately 40% of companies in the S&P 500 have now adopted proxy access. We expect that proxy access will become a majority practice among S&P 500 companies within the next year.

Senate Bill Would Limit Shareholder Rights – The New York Times

Jason N. Ader and Eric Jackson write about proposed legislation that would significantly impair the rights of shareholders.

[T]wo Senate Democrats – Tammy Baldwin of Wisconsin and Jeff Merkley of Oregon – have introduced a bill that would restrict shareholder rights. The bill was co-sponsored by Senators Elizabeth Warren and Bernie Sanders. Would these same Democrats favor restricting voter rights to make it more difficult for voters to express their views? Then why restrict shareholder rights?

The bill seeks to shorten the number of days to two from 10 that shareholders have to disclose that they have bought more than 5 percent of a company, force shareholders to disclose derivatives and short positions they hold in a company, as well as redefine the rules about who has taken a 5 percent stake in a company to prevent “wolf pack” investing, which occurs when a lead fund tips off others that a disclosure is about to be made, giving them the opportunity to buy the same stock before the 10-day window is up.

The bill is misguided. Its backers are unwittingly supporting entrenched and underperforming managers to restrict shareholders from having the right to oust them.

via Senate Bill Would Limit Shareholder Rights – The New York Times.