shareholder rights

US institutional investors have written to the Securities and Exchange Commission (SEC), following a meeting with the financial regulator voicing their public support for the SEC’s Rule 14a-8 which provides them with the right to put forward resolutions at company meetings.

For advocates of the system of non-binding shareholder resolutions or proposals at US company meetings, they are seen as being a positive force for achieving corporate governance improvements and for changing the approach of boards on issues such as proxy access and climate risk reporting.

However, a paper published earlier year by the US Chamber of Commerce proposed seven recommendations to the SEC  for reforming Rule 14a-8 of the Securities Exchange Act which it described as a “broken system”.  This illustrated the long-running suspicion of shareholder resolutions within the US corporate sector. Republican politicians have also supported the view that the resolutions are a burden on companies.

The SEC released a staff legal bulletin on the at the beginning of November which concerned some shareholders. However the investors in their letter said: “While we are reserving judgement about how the guidance may apply in practice, we are particularly pleased by Director Hinman’s accompanying statement that the guidance is not intended to “make things easier or harder for one side or the other, . . . [but] to improve the process.” We strongly support that goal and plan to actively monitor the SEC staff no-action process during the upcoming proxy season to determine whether the goal was achieved.”

The authors of the letter: Ken Bertsch executive director, of the Council of Institutional
Investors; Lisa Woll chief executive (CEO) of the US Forum on Responsible and Sustainable Investment; Mindy Lubber CEO of Ceres and Joshua Zinner CEO of the  Interfaith Center on Corporate Responsibility, added that they looked forward to continuing to work with the SEC “to ensure that Rule 14a-8 continues to provide investors with a cost effective and efficient means to communicate with their fellow shareholders, boards of directors, and corporate management.

Boost for support of political expenses disclosure resolutions put down to Trump effect

The Center for Political Accountability (CPA) has reported an increase this year in support by mutual funds for its shareholder resolution calling for disclosure of corporate political spending. Support rose to 48% from 43% in 2016 while abstentions decreased from 5% to 3% according to an analysis by Fund Votes which the CPA believes indicates a shift toward more active support for political transparency in the first year of Donald Trump’s presidency.

Investors SEC protect shareholder rights
Campaigners believe President Trump’s presidency has increased support for political expenses disclosure

CPA president Bruce Freed said: “These developments are important. Mutual funds are the largest
shareholders across America, and how they cast their proxies has a major impact on
company policies and practices. What we’re seeing is a shift in support for political disclosure
and accountability, and companies would be smart to heed it.”

The research found that among 20 of the 23 largest asset managers globally, average support for the CPA resolution was 37.3%, based on 22 resolutions filed. This represented an increase of more
than six percentage points from 2016 when average support was 31.1%, based on 27 resolutions filed. In addition, more fund groups participated in voting on the resolutions with abstentions decreasing by an average of eight percentage points from 11.5 to 3.4%.

Dual-class shares under fire at Twenty-First Century Fox

A shareholder resolution calling on the media company Twenty-First Century Fox to scrap its dual-class share structure was rejected this week although the measure received significant support among voters outside the controlling Murdoch family.

The majority of Fox shares traded publicly are class A shares, which have no voting rights. The Murdoch family owns about 39% of the class B voting shares, according to recent disclosures from the company.

There was a 57% vote in support of the company however 43% in support of a shareholder resolution indicates considerable investor disquiet at the dual-share class structure. The resolution was proposed by the Nathan Cummings Foundation which is seeking to improve shareholder rights at Fox.

Last Updated: 17 November 2017
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