shareholder proposals US Chamber of Commerce

No, says veteran US corporate governance activist James McRitichie, In his blog,, Jim emphatically rebuts the claims made in a paper recently published by the US Chamber of Commerce’s Center for Capital Markets Competitiveness which argues that the US regulation regarding shareholder resolutions needs reform in order to “improve long-term company performance and investor confidence“.

The paper, part of the Chamber’s long-running campaign against shareholder rights, proposes seven recommendations to the US Securities and Exchange Commission (SEC)  for reforming Rule 14a-8 of the Securities Exchange Act which it described as a “broken system”. McRitchie rejects that description stating: “many of the Chamber’s attestations are #alternativefacts and its recommendations are more likely to hurt our economy than help it.”

shareholder proposals US Chamber of Commerce
James McRitchie: US Shareholder resolution rules do not need changing

In its paper, the US Chamber of Commerce develops its narrative framing the Dodd Frank Act and shareholder stewardship as the cause of IPO scarcity. Far from regulations becoming more favourable to shareholders, McRitchie argues that there had in fact been an “erosion of shareholder rights, with regard to the inclusion of proposals in corporate proxies”. 

On the Chamber’s wish list are: introducing a requirement for proponents to provide sufficient disclosure regarding their economic interests and objectives which it said would provide more transparency to investors; introducing a rule so that a proposal could be excluded if the subject matter impacted less than 5% of a company’s total assets and 5% of net earnings and prohibiting the use of images, photos, or graphs as part of proposals, although still allowing them to link to online material.

The Chamber of Commerce paper notes that half of all shareholder resolutions submitted to Fortune 250 companies during the 2016 proxy season dealt with some type of social or policy related matter which it said shareholders have overwhelmingly rejected when put to a vote. McRitchie pointed out that this did not mean those matters were not material. Indeed, many of the proposals relate to disclosures and policies which are now typically enshrined in law or good practice in the UK and Europe, particularly with regard to sustainability or human capital issues.

Even where resolutions were not passed, McRitchie says that this does not mean that companies do not listen to the arguments made by investors. For example, the paper found that between 2006 and 2016 Fortune 250 companies received 445 proposals dealing with corporate political disclosures and just one had the backing of the majority of shareholders. However, the Center for Political Accountability (CPA) working with others had persuaded 153 leading public companies, including 53 in the S&P 100, to adopt political disclosure and oversight.

McRithie’s post is worth reading in full, together with a similar note from Adam Kanzer of Domini Impact Investments in June this year entitled: The Dangerous “Promise of Market Reform”: No Shareholder Proposals

Both the US Chamber of Commerce and Business Roundtable have lobbied heavily against corporate governance and sustainability standards that European and Asia-Pac companies and investors see as modern norms. After President Donald Trump’s announcement of withdrawing from the Paris Climate Agreement, many US corporations, members of either CoC or BRT, publicly distanced themselves from the President’s policy position. There are now calls on those companies to reconsider their membership of their lobby groups because of the clear inconsistencies between stated policy positions and practices.

The so-called CHOICE Act which would, if passed by the US Senate, roll back substantial parts of Dodd Frank and curtail investors and their advisors in the process. The reform of US proxy plumbing after 37 years of neglect was similarly brought to a halt through the CoC’s intervention. The knock-on effect of these interventions is not confined to the US markets as US vendors currently dominate the shareholder voting industry, bringing with them US standards and approaches. The Chamber also actively lobbies the European Commission through its Am-Cham-EU subsidiary.

Also worth reading:

Financial Choice Act is a blatant attack on shareholder rights: The bill is a huge step backwards for US corporate governance, says Madison Marriage of the Financial Times


Last Updated: 6 August 2017
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