SEC Proposes Changes to Shareholder Proposal Rules
On November 5, 2019, the Securities and Exchange Commission (SEC) voted to propose significant changes to Rule 14a-8 governing shareholder proposals. The proposals were developed as a result of the SEC’s Proxy Process Roundtable held in November 2018 and were announced with a goal to “facilitate and encourage meaningful company-shareholder engagement, and make changes that can help prevent misuse of the process.”
The full proposal can be found here: https://www.sec.gov/rules/proposed/2019/34-87458.pdf.
The SEC’s proposal would adopt “enhanced ownership requirements under Rule 14a-8(b) that take into account both the amount of securities owned and the length of time held, in determining a shareholder’s eligibility to submit a shareholder proposal.” The changes would specify tiered dollar amounts of securities held that would entitle the owner to vote on the proposal, coupled with a minimum holding period as follows: $2,000 held for at least three years, $15,000 held for at least two years, or $25,000 held for at least one year.
Additionally, the proposed rules would require specific documentation to be provided when a proposal is submitted by a representative on behalf of a shareholder-proponent, such as the shareholder’s statement authorizing the designated representative to submit the proposal, and a statement by the shareholder supporting the proposal.
The proposed amendments include a new level of shareholder engagement by requiring a statement by the shareholder-proponent as to when he or she would be able to meet with the company in person or via teleconference to engage with the company with respect to the proposal, within a time frame no less than 10 calendar days and no more than 30 calendar days after submission of the shareholder proposal.
The SEC is also proposing rules to provide that a person may submit no more than one proposal, directly or indirectly, for the same shareholders’ meeting. Finally, amendments to the resubmission thresholds are proposed to raise the current resubmission thresholds to 5%, 15%, and 25%, respectively, and to add a new provision that would allow companies to exclude proposals under certain circumstances in which shareholder support for the matter has declined over time.
The SEC is inviting public comments on these issues, which are due 60 days after publication in the Federal Register.