New SEC guidance could raise bar for some shareholder measures

From Reuters - November 2, 2017

BOSTON (Reuters) - Companies may have new grounds to keep shareholder proposals on social or ethical matters from coming to a vote at their annual meetings under guidance published late on Wednesday by theU.S. Securities and Exchange Commission.

According to the report, known as a staff legal bulletin and posted on the agencys website, the SEC will take new account of a proposals economic relevance and its significance when companies ask for permission to skip votes on measures affecting less than five percent of their assets, earnings or sales.

Proponents could still argue their resolutions are significantly related to a companys business, the paper states. But shareholder activists focused on social matters worry the new guidance could give companies more room to avoid proposals such as on opioid controls at drug companies, where the drugs make up just a small fraction of a companys revenue.

Clearly it will put new burdens of proof oninvestor proponents, Tim Smith of Walden Asset Management, a frequent filer of social, governance and climate-related resolutions, said via e-mail.

Once seen as a distraction, proposals dealing with topics like climate change or gender diversity have gained a higher profile in recent years as they have drawn more backing from big asset managers. At the same time business groups lately have sought to restrict the proposals they say are often irrelevant, such as by raising the amount of shares needed to file them.


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