SEC proposes limits on shareholder campaigns — a win for CEOs

The U.S. Securities and Exchange Commission headquarters in Washington.
(Andrew Harnik / Associated Press)

U.S. business titans are a step closer to victory in a long fight to overhaul corporate voting rules that they say subject them to unfair shareholder campaigns.

The Securities and Exchange Commission proposed changes Tuesday that would rein in proxy advisory firms and make it easier for companies to block submissions from newer stockholders who don’t own many shares. Several investor advocates, pension fund managers and hedge funds have already signaled they’re concerned that changes the SEC is seeking comment on would weaken shareholder protections.

“It’s time to move from debate in the abstract to constructive engagement on actual proposals,” SEC Chairman Jay Clayton said in support of the proposals before commissioners approved releasing them in two 3-2 votes. “We make that transition today. Our work in this space will continue.”

The changes would increase the value of stock that shareholders need to have before they can submit proposals if they haven’t been invested for three years, according to an SEC fact sheet on the rule.


The agency also calls for increasing the level of support shareholders need to resubmit a proposal that had previously failed.

Proxy advisory firms would generally be required to share recommendations twice with management before shareholders could see them, according to an SEC official.

Advisory firms would have to give a company as long as five days to review their advice and comment on it, the official said. Advisors would then have to show a final version to companies after making changes and allow managers two more days to prepare a response that would be delivered with the recommendation.

The proposal would also require proxy advisory firms to disclose conflicts of interest and other material issues, according to the SEC.


Elad Roisman, one of two Republican commissioners who joined political independent Clayton in backing the proposals, said the changes are meant to update rules to address how market dynamics have changed.

Commissioner Allison Lee, a Democrat who opposed the proposal along with independent Robert Jackson Jr., said the measures would “suppress the exercise of shareholder rights.”

Before the vote, Clayton said the SEC would soon propose changes to rules for corporate ballot cards and other aspects of proxy voting.

The proposals will be released for a 60-day public comment period, and commissioners will have to hold a second vote for the rules to take effect.