SEC Determines That Shareholder Climate Change Proposals Should Not Be Excluded
This week, the SEC issued a new staff legal bulletin concerning shareholder proposals, which stated, as a matter of SEC policy, that proposals "request[ing] companies adopt timeframes or targets to address climate change" are no longer considered excludable under Rule 14a-8. (This rule enables corporations to exclude certain shareholder proposals from being considered, albeit after review by the SEC.) This policy decision by the SEC means that companies will face a presumption that shareholder proposals concerning climate change will no longer be able to be excluded by management from consideration in a shareholder vote.
Commissioners Peirce and Roisman, both Republican appointees, noted that this rule would likely have little practical effect, since "no climate change proposals were excluded [in 2021]" and "in 2020, only four climate change proposals were excluded based on micromanagement arguments."
Nonetheless, this SEC policy sends a strong signal that climate change issues are a proper focus for shareholder concern, and that corporate management should take these issues into account when running the affairs of a company.
Today the Division of Corporation Finance issued a new staff legal bulletin relating to shareholder proposals, which rescinded the last three bulletins and indicated that the staff may no longer agree that certain proposals are excludable from proxy statements under Rule 14a-8. Notably, the Bulletin singles out as likely no longer excludable proposals “squarely raising human capital management issues with a broad societal impact” and proposals that “request companies adopt timeframes or targets to address climate change.” While it is disappointing to see these two topics highlighted for special treatment, it is not altogether surprising given current SEC priorities.