On November 5, the Securities and Exchange Commission (SEC) in a 3-2 decision voted to propose amendments to rules governing shareholder proposals in companies’ proxy statements. These proposed amendments – which seek to revise Rule 14a-8’s eligibility requirements, one-proposal limit, and resubmission thresholds – follow on the heels of recent guidance issued by the Staff of the Division of Corporation Finance related to the no-action letter process for shareholder proposals.
The press release announcing the proposed changes noted that the changes are part of the SEC’s ongoing focus on improving proxy access and the ability of shareholders to exercise their rights to vote. SEC Chairman Jay Clayton commented in the release that the proposed changes are designed to “facilitate constructive engagement by long-term shareholders in a manner that would benefit all shareholders and our public capital markets.” Not without controversy though, the rule revisions are receiving criticism from shareholder advocacy groups, while business-minded groups like the U.S. Chamber of Commerce have come out in support of the proposed changes.
Eligibility Requirements for Shareholders
The current eligibility requirements require that a shareholder proponent hold at least $2,000 or 1% of a company’s securities for at least a year to be eligible to submit a proposal. The proposed revisions, eliminate the 1% threshold and replace the $2,000 threshold with the following three alternatives: