May 12, 2020

Proposed Shareholder Resubmission Thresholds: Disproportionate Effect?

That’s what a recent report issued by the Council of Institutional Investors says.  A lot has been said about the SEC’s proposed rules relating to the shareholder proposal process, including changes to the submission and resubmission thresholds – John blogged a while back about some of the colorful comment letters and one story says that the SEC was flooded with over 13,000 comment letters.  CII’s report examined shareholder proposal data from 2011 through third quarter 2019 and found that, had the proposed resubmission thresholds been in effect, certain proposals would have been excluded more than others.

Here’s some of CII’s findings:

– CII estimates the 5/15/25 resubmission thresholds, paired with the 10% momentum requirement, would have more than doubled the number of proposals excluded

– Unlike the proposed higher thresholds, the new momentum requirement would have impacted governance proposals considerably more than environmental or social proposals

– Overall, CII’s study showed that proposals requiring independent board chairs and those relating to political contributions and lobbying were the types of proposals that would be most impacted by the proposed rules – meaning more frequently excluded from proxy statements

It’s not necessarily surprising that the new resubmission thresholds potentially increase the number of proposals that would be excluded, although it’s interesting that this study shows it would impact governance proposals more than others.  At this time, it’s not certain the Commission will approve the rules as proposed or whether further changes are on the horizon.

SEC Chairman Clayton Executive Roster Updates

The SEC has been busy!  Yesterday, SEC Chairman Jay Clayton released an updated roster of his executive staff, including some additions.  After issuing and updating Covid-19 related guidance, holding virtual/web meetings and announcing awards to whistleblowers it looks like, for a brief moment anyway, the SEC’s focused on organizational matters.

John Moses was named Managing Executive in the Office of the Chairman and in the role, he will advise the Chairman on matters relating to agency administration, operations and management, and will serve as the Chairman’s primary liaison to divisions and offices on these matters.  Moses was previously the Deputy Director in the SEC’s Office of Minority and Women Inclusion.

Peter Uhlmann, who has been serving as Managing Executive in the Office of the Chairman, will assume a new role in the agency’s Office of Compliance Inspections and Examinations. Uhlmann will join the OCIE’s Office of Chief Counsel as Assistant Director for Compliance, where he will oversee internal compliance, ethics, and operational risk management efforts for the SEC’s National Exam Program and its more than 1,000 employees.

Tomorrow’s Webcast: “Capital Raising in Turbulent Times”

Tune in tomorrow for the webcast – “Capital Raising in Turbulent Times” to hear Manatt, Phelps & Phillips’ Katherine Blair, Wilson Sonsini’s Richard Blake, Locke Lord’s Rob Evans and Jones Day’s Mike Solecki discuss the current state of the new issues market for debt and equity and they will explore financing and liability management alternatives.  Don’t miss it!

– Lynn Jokela