SRG Responds to HP, SEC Commissioner Hester Peirce’s Attack on Shareholder Rights
The Shareholder Rights Group (SRG) has written a letter to the SEC Commissioners refuting Commissioner Hester Peirce’s recent speech. Commissioner Peirce argues against environmental and social proposals and disclosure and proposes increasing ownership thresholds for filing proposals. Please note that our lawsuit against the SEC for a previous rulemaking that increased the qualifications for filing a shareholder proposal tenfold is still pending in court.
Again, Commissioner Peirce wants to raise thresholds for filing proposals after increasing them tenfold. Proposals are best seen as low-cost, nonbinding advice. There is no correlation between good advice and the size of holdings. For example, I have already withdrawn most of my proposals for the upcoming season because companies agreed to implement them. Below is a summary of our opposing perspectives.
SRG Responds to HP: Public companies are dragged into social and political controversies
SRG: Simply because issues are debated and contested in the social and political realm does not make them less relevant to companies or unrelated to corporate value.
SRG Responds to HP: Suggests changing the shareholder proposal rules to increase ownership thresholds
SRG: Raising the thresholds contradicts the Commission’s oft-touted focus on protecting smaller investors. (Chairman Clayton: the “common theme” of the Commission’s work is “serving the interests of our long-term Main Street investors.”) Raising thresholds also ignores the outsized role of small investors in deploying the shareholder proposal process to drive governance reforms. Instead, it would disenfranchise small investors.
SRG Responds to HP: Environmental and social shareholder proposals divert corporate policy to benefit non-investor interests
SRG: Environmental and social shareholder proposals allow shareholders to make informed decisions on material interests relevant to them as investors, including potential operational, financial, legal, and regulatory risks to corporate value.
The ostensibly non-investor interests that Peirce refers to connect to these material interests. For instance, proposals seek action on climate change, but companies are also financially impacted by climate change (reduction in GDP, extreme weather). Similarly, proposals focused on working conditions relate to investor issues framed as human capital management (resilience, competitive edge). Two meta-studies and another analysis found ESG to be additive to corporate value; research also shows that engagement on ESG issues increases company returns. (see Letter footnotes)
Shareholder proposals have benefitted the American public across a range of topics and industries by increasing corporate accountability on excessive drug pricing by pharmaceutical companies, improvements in online child safety by tech companies, greater board oversight of opioid manufacturers, distributors and pharmacies, enhanced attention to worker health and safety and greater accountability for the potentially toxic effects of corporate products on consumers and drinking water. Having shareholders as agents of change on these issues is a benefit, not a drawback, of the shareholder proposal process.
The Letter also included a link to the recently published report of SRG, ICCR, and US SIF, which extensively expounds on these issues.
About the Shareholder Rights Group
The Shareholder Rights Group is an association of investors, including James McRiotchie, formed to defend the shareowner’s right to engage with public companies on governance, corporate accountability, and long-term value creation. Visit our website at shareholderrightsgroup.com. Many thanks to Sanford Lewis (Director and General Counsel), Cynthia Simon (Policy Director), and the many members of SRG who helped pull this work together. Much more will be needed going forward in these divisive times.
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