The SEC has recently enacted rules that make it tougher for shareholders to submit ballot proposals. As we previously blogged about, the rules now approved by the SEC by a 3-2 vote: (1) increase the monetary amounts and length of investment required to submit shareholder proposals and (2) raise the threshold of shareholder support required to resubmit proposals previously voted down by shareholders.
In supporting the revised standards, SEC Commissioner Hester M. Peirce stated the changes “help to ensure that the shareholder-proponent’s interests are aligned with those of her fellow shareholders.” However, opponents argue the new rules silence small investors with the monetary thresholds.
For larger investors, the more interesting (or perhaps, concerning) aspect is the change to resubmission thresholds – which now require that a proposal have received at least 5%, 15%, or 25% support, if voted on once, twice, or three times, respectively, in the past five years, or else the proposal will be barred from reconsideration for three years. 25% support is a significant increase from the prior threshold of 10%, as are the other thresholds, going from 3% to 5% and 6% to 15%, respectively. This change may be relevant to activists as they build positions in companies and consider shareholder proposals.
We will continue to cover updates to shareholder proposals, as they are one of the important tools available to minority investors who seek to enforce corporate governance.