In what is being seen by investors as a major setback for corporate transparency and shareholder democracy, the SEC today announced the imposition of new rules severely restricting shareholders’ access to the corporate proxy by limiting the filing of resolutions. The SEC’s move comes after years of lobbying by powerful industry trade associations that have sought to limit shareholder engagement with corporations on critical environmental, social, and governance issues.

The SEC’s Rule 14a-8...has allowed shareholders with a minority stake held for over one year to file proposals asking companies to consider additional disclosures, policy, or governance changes they believe would benefit the company and protect shareholder value. While non-binding in nature, the vast majority of these proposals raise significant questions regarding the environmental and social impacts of corporate policies and practices, or governance best practices... It is not at all uncommon for these proposals to achieve majority shareholder support and often votes of 25% or higher will elicit a meaningful corporate response.  

... [T]he new rules make it much more difficult to refile a proposal that has been voted on. The prior rule required 3% support on a first-year vote, 6% on a second vote, and 10% on a third vote to keep a proposal before a company’s shareholders. Now resubmission will require 5% on a first vote, 15% on a second vote and 25% on a third vote.

... The Commission’s effort to curtail shareholder rights runs directly counter to broader trends in the business and investor communities toward greater accountability to stakeholders and investor reliance on environmental, social and governance.