SEC Takes Action to Restore Shareholder Rights
FOR IMMEDIATE RELEASE
MEDIA CONTACT: Stefanie Spear, [email protected], 216-387-1609
BERKELEY, CA—NOV. 3, 2021—The SEC today released a Staff Legal Bulletin (14L) rescinding three bulletins released over the past four years that made it difficult for shareholders to exercise their right to present shareholder resolutions for a vote at company annual general meetings.
Bulletin’s 14 I, J & K were rescinded. These bulletins severely limited meaningful shareholder proposals, including vastly expanding the prohibition on micromanagement in a way that allowed exclusion of shareholder proposals containing almost any specific request, timelines, or action.
In rescinding bulletin 14K, staff clarified that proposals that raise significant social policy issues, and do not micromanage companies, will be allowed to move forward.
The actions today hew closely to the commission’s 1988 release that allowed specific methods and timelines in a proposal so long as they are not too prescriptive or otherwise significantly limit company discretion. An example given by staff noted that a proposal that asks a company to set greenhouse gas emissions targets aligned with global goals or frameworks, without imposing specific criteria for how to do so, is not generally excludable based on micromanagement. This follows commission guidance that the micromanagement and ordinary business exclusions are designed to preserve management's discretion on ordinary business matters but not to prevent shareholders from providing high-level direction on large strategic corporate matters.
Bulletin 14I noted that consistent with its prior approach, proposals raising broad social or ethical concerns related to a company's business may not be excluded on the basis that the relevant business falls below economic thresholds of 5% of the company's total assets or net earnings and gross sales, when they are "otherwise significantly related to the company's business.”
The bulletin also addresses other issues including images in proposals, proof of ownership letters, and email notices.
Danielle Fugere, president of As You Sow, said:
“This guidance, which underscores the original purpose of Rule 14a-8 — to allow shareholders to raise and vote on important issues — is timely and necessary. At this time of global upheaval, the stakes couldn’t be higher. The shareholder voice plays a critical role in ensuring companies are addressing issues that create risk and opportunity and can affect shareholder value, including greenhouse gas emissions targets and actions, addressing social justice, demonstrating success in diversifying workplaces and boardrooms, reducing the harmful impact of social forums like Facebook, and reducing plastic waste.”
Attorney Sanford Lewis, who works with a broad range of shareholders in defending against company no-action letters, said:
“The SEC’s new guidance essentially resets the 14a-8 standards to the fair and functioning process that existed prior to changes by the last administration. Those prior changes significantly undercut shareholder rights.”
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As You Sow is a nonprofit organization that promotes environmental and social corporate responsibility through shareholder advocacy, coalition building, and innovative legal strategies. See our resolutions here.