Ron Orol Interviews McRithie

Ron Orol Interviews Jim McRitchie for The Deal

Ron Orol of The Deal interviewed me (James McRitchie) last month. Here are some of the topics we covered and a few afterthoughts.

Submission and Resubmission Levels

Ron Orol asked about the idea raising the thresholds for submitting and resubmitting shareholder proposals. Of course, depending on the threshold level, that could put an end to the whole process and company evolution towards more democratic models would likely cease. Think of it. Shareholder proposals brought us independent directors, disclosure of executive pay, a vote on the auditor and so much more. We could have avoided the 2008 Great Recession if shareholders and banks had heeded the warnings of the religious community and their proposals addressing the risks of subprime loans.

Ron Orol noted SEC Chairman Jay Clayton recently asked the SEC’s Investor Advisory Committee members whether submission and resubmission thresholds for shareholder proposals are “appropriately crafted” to ensure that the proposing shareholder’s interests are aligned “with those of a reasonable portion of the company’s long-term investors.” Any comment – some do get low votes many years in a row?

You can bet I worked my rulemaking petition to the SEC into the conversation. If people knew how their funds are voting they would be appalled. 25% of funds are now invested with ESG themes. Yet, most of those funds are voting against ESG shareholder proposals. There is a lot of greenwishing on the part of Mr. and Ms. 401(k) and Main Street investors. And, there is a lot of greenwashing on the part of mega-fund families with new funds including ESG in their titles.

My petition would require funds to report their votes in real time… not up to a year later, as they do today. Instead of practically being encrypted, I am asking that funds disclose those votes in machine readable format. If Mr. and Ms. 401(k) can compare voting records, we would see a lot of people demanding changes. See Mutual Fund Wars Over Fees AND Proxy Votes with directions at the bottom for sending a letter of support to the SEC.

Verbal No-Actions

Ron Orol asked about the new SEC has just put out some guidance for using verbal responses. What impact will that have? I said it comes dangerously close to hiding the law. I also warned that it may lead companies to bypass the SEC and go directly to court. That would be a mistake. Companies lost before and next time it will be more costly because they will have to pay my attorney’s fees.

Shareholders vs Stakeholders

Ron Orol asked about the new statement of purpose issued by the Business Roundtabe. I basically argued the BRT was taking a page from President Trump’s playbook by creating a distraction.

  • Raising Proxy Proposal Submission Thresholds
  • Oral No-action responses
  • Attack Proxy advisors with new guidance that “Providing advice that is “false or misleading” would lead to a violation of the exempt solicitation rule.

Listen to the Ron Orol podcast and read my post Shareholders v Stakeholders.

Ron Orol has many other great podcasts. I highly recommend tuning in to The Deal: Activist Investing Today.


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