Here is the SEC Fact Sheet on today’s shareholder proposal rule amendments:
FACT SHEET
Procedural Requirements and Resubmission Thresholds under Exchange Act Rule 14a-8
SEC Open Meeting
Nov. 5, 2019
The Securities and Exchange Commission today proposed amendments to Exchange Act Rule 14a-8, the shareholder-proposal rule, which requires companies subject to the federal proxy rules to include shareholder proposals in their proxy statements, subject to certain procedural and substantive requirements. The rule permits a company to exclude a shareholder proposal from its proxy statement if the proposal fails to meet any of several specified substantive or procedural requirements, or if the shareholder-proponent does not satisfy certain eligibility or procedural requirements. The proposed amendments would:
- update the criteria, including the ownership requirements, that a shareholder must satisfy to be eligible to have a shareholder proposal included in a company’s proxy statement
- update the “one proposal” rule to clarify that a single person may not submit multiple proposals at the same shareholder’s meeting, whether the person submits a proposal as a shareholder or as a representative of a shareholder; and
- modernize the levels of shareholder support a proposal must receive to be eligible for resubmission at the same company’s future shareholder meetings.
Background
The Commission’s proposal is part of its ongoing focus on improving the proxy process and the ability of shareholders to exercise their voting rights. SEC staff have been deeply involved in the proxy process for decades and review hundreds of unique shareholder proposals and other proxy materials each year. Over the years, the Commission has become aware of the need to update certain of the rule’s procedural and substantive requirements, which have not been reviewed by the Commission in more than 20 years. After considering the views expressed by members of the public, including feedback received as part of the Commission’s 2018 Roundtable on the Proxy Process, the Commission proposed amendments to modernize the criteria for use of the shareholder-proposal process through the company’s proxy statement.
Highlights
The proposed amendments would revise the eligibility requirements under Rule 14a-8(b), the one-proposal limit under Rule 14a-8(c), and the resubmission thresholds under Rule 14a-8(i)(12).
In particular, the proposed amendments to Rule 14a-8(b) would:
- update the current requirement that a shareholder-proponent hold at least $2,000 or 1 percent of a company’s securities for at least one year to be eligible to submit a proposal. In addition to eliminating the 1 percent threshold, the proposal would amend the rule with the following three alternative thresholds, any one of which a shareholder could satisfy to be eligible to submit a proposal:
- continuous ownership of at least $2,000 of the company’s securities for at least three years;
- continuous ownership of at least $15,000 of the company’s securities for at least two years; or
- continuous ownership of at least $25,000 of the company’s securities for at least one year.
- require that a shareholder-proponent who elects to use a representative for the purpose of submitting a shareholder proposal provide documentation to make clear that the representative is authorized to act on the shareholder-proponent’s behalf and to provide a meaningful degree of assurance as to the shareholder-proponent’s identity, role and interest in a proposal that is submitted for inclusion in a company’s proxy statement; and
- require that each shareholder-proponent state that he or she is able to meet with the company, either in person or via teleconference, no less than 10 calendar days, nor more than 30 calendar days, after submission of the shareholder proposal, and provide contact information as well as business days and specific times that the shareholder-proponent is available to discuss the proposal with the company.
The proposed amendment to Rule 14a-8(c) would:
- apply the one-proposal rule to “each person” rather than “each shareholder” who submits a proposal, such that a shareholder-proponent would not be permitted to submit one proposal in his or her own name and simultaneously serve as a representative to submit a different proposal on another shareholder’s behalf for consideration at the same meeting. Likewise, a representative would not be permitted to submit more than one proposal to be considered at the same meeting, even if the representative were to submit each proposal on behalf of different shareholders.
The proposed amendments to Rule 14a-8(i)(12) would:
- modernize the current resubmission thresholds of 3 percent, 6 percent and 10 percent for matters voted on once, twice or three or more times in the last five years, respectively, with thresholds of 5 percent, 15 percent and 25 percent, respectively;[1] and
- add a new provision that would allow for exclusion of a proposal that has been previously voted on three or more times in the last five years, notwithstanding having received at least 25 percent of the votes cast on its most recent submission, if the proposal (i) received less than 50 percent of the votes cast and (ii) experienced a decline in shareholder support of 10 percent or more compared to the immediately preceding vote.
What’s Next?
The proposal will be subject to a 60-day public comment period. To submit comments, use the SEC’s Internet submission form or send an email to rule-comments@sec.gov.