U.S. Securities and Exchange Commission Chair Gary Gensler announced the release of a new statement regarding proxy voting rules put in place by the commission last year that were seen as placing significant restrictions on shareholder’s ability to engage with companies through the proxy and shareholder proposal process. According to the statement, the SEC will not recommend enforcement of the new rules, and the Chair has recommended that the rules be revisited.
In July 2020, the SEC voted 3-1 to approve amendments to its rules governing proxy solicitations that affected the role of proxy advisor services. While the SEC presented the rules as providing investors with greater transparency and complete information, many shareholder advocates opposed the rule as negatively impact shareholders, making the ability to provide proxy advice more costly and less efficient, while impacting the independence of the advice.
In September 2020, this was followed by a 3-2 SEC decision to adopt new rules effectively setting limits on shareholder proposals to be voted on at annual meetings. The new rule significantly raised the holdings amount and length of ownership thresholds for submitting proposals, and also raised the criteria for shareholder support required for resubmitting proposals at future meetings.
The announcement marks a significant victory for shareholder advocates and proxy adviser firms. Earlier this year, a group of nearly 200 pension funds, asset managers, foundations, labor unions, religious organizations and consumer groups launched a campaign seeking to overturn the rules, in a letter to members of Congress highlighting the rules’ effect of severely limiting the ability of shareholders to file resolutions on key environmental, social, and governance issues.
In a statement commenting on the SEC announcement, Gary Retelny, President and CEO of corporate governance and ESG solutions provider Institutional Shareholder Services (ISS) said:
“We welcome the SEC’s announced decision to consider revisiting its proxy adviser rulemaking, which we believe was ill-conceived, inconsistent with the law, and pushed through under the previous administration against the wishes of investors the agency is meant to protect. We look forward to participating in the upcoming rulemaking process and encourage all good governance supporters to do the same.”