By Katanga Johnson and Ross Kerber
WASHINGTON (Reuters) -The U.S. Securities and Exchange Commission on Wednesday published new staff guidance that may make it harder for corporations to keep shareholder proposals on matters like workforce diversity or climate from being voted on at annual meetings.
The new bulletins replace Trump-era guidance that gave companies more room to toss proposals on hot-button social issues, changes critics said had aimed to silence investors’ voices.
Among other changes, staff now will give more consideration to the social policy significance of a shareholder proposal and will recognize “that proposals seeking detail or seeking to promote timeframes or methods do not per se constitute micromanagement,” or grounds for exclusion, said the bulletin published by the SEC’s Division of Corporation Finance.
“The right to put proposals in front of other shareholders for a vote is an important part of the securities laws,” SEC Chairman Gary Gensler said in a statement.
“Today’s bulletin will provide greater clarity to companies and shareholders on these matters, so they can better understand when exclusions may or may not apply,” he said.
Shareholder voting rights have become a major bone of contention as more investors have pushed companies to take up social and environmental issues, and drawn more support from top investment firms.
Under agency rules, shareholders who want to bring a proposal for a vote must first submit it for a company’s proxy statement – months before the annual meeting itself – and companies often seek agency permission to skip the proposal. Separate SEC rule changes from 2020 that raised the share ownership needed to file a resolution remain in place but face litigation.
Sanford Lewis, director of the Shareholder Rights Group, which represents socially-minded investment firms that often file proposals, praised Wednesday’s changes.
“They have taken away a bunch of burdensome interpretations that made it harder, more uncertain and more expensive for shareholders to file proposals,” he said in an interview.
The two Republican appointees on the five-member commission, Hester Peirce and Elad Roisman, said in a joint statement that “The rationale for today’s action is a bit of a mystery,” with the practical effects of the changes unclear.
Sorting out which proposals can be excluded from company proxies “has long been an insatiable consumer of staff time” at the agency, the two commissioners wrote, adding that the new bulletin “does not make their jobs easier.”
(Reporting by Katanga Johnson in Washington and by Ross Kerber in BostonEditing by Michelle Price and Jonathan Oatis)
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