TheCorporateCounsel.net

It feels like a lifetime ago, but you may remember that a coalition of investors led by ICCR filed a lawsuit in 2021 challenging the SEC’s 2020 amendments to Rule 14a-8, which, among other things, had changed the submission and resubmission thresholds in the rule. The complaint questioned the SEC’s economic analysis and argued that the SEC exceeded its authority to unfairly impede the shareholder proposal process. The lawsuit was supported by many institutional investors.

As Reuters reports, last Thursday, a District Court granted the SEC’s motion for summary judgment.

U.S. District Judge Reggie Walton in Washington, D.C. rejected arguments that the SEC arbitrarily and capriciously adopted the changes, including on the alleged pretext it supported corporate opposition to reforms on contentious issues such as climate change and workplace diversity.

The SEC was required to determine whether the changes would “promote efficiency, competition, and capital formation, and it did so,” Walton wrote in a 64-page decision . . .

In a joint statement following Walton’s decision, the plaintiffs said the changes “only serve to hurt shareholders and companies alike. Despite this decision, shareholders will continue to engage with corporations on their environmental and social impacts.”

House Committee on Financial Services Chairman French Hill and Subcommittee on Capital Markets Chairman Ann Wagner issued a statement applauding the decision and noting, “The House Financial Services Committee will continue working to streamline the proxy process and reduce burdens for companies seeking to compete in our public markets.”

– Meredith Ervine