Senate Banking Committee leaders disagreed Thursday on whether Congress should enact new laws governing corporate shareholder votes even as the Trump administration explores what actions it can take on its own.
Currently, investors with as little as $2,000 worth of a company’s stock can introduce proposals directing its board to take specific actions, though they seldom garner the majority needed to take effect. As activist firms on both sides of the political spectrum increasingly capitalize on the low threshold to advance more socially-oriented proposals on issues like board diversity, political donations, and the environment, U.S. businesses are pressing Congress and the Securities and Exchange Commission to step in.
Addressing the proposals is costly, companies say, and they often deal with issues beyond the scope of the board, delving instead into the daily management of the business.
One change under consideration by the SEC is raising the minimum investment needed before a measure can be filed, a shift that would likely garner intense push-back from so-called retail investors, individuals who purchase and manage their own stock. But Corporate America has at least one powerful supporter: Senate Banking Committee Chairman Mike Crapo, an Idaho Republican.
“It is time to re-examine the standards for inclusion of these proposals” in light of the proliferation of environmental, social, or political initiatives, he said at a hearing on the issue.
Opposition from the top Democrat on the panel, however, could stymie any hope of crafting a bipartisan bill.
“Folks in this town want to stack the deck even further against Main Street, small-time investors,” Sen. Sherrod Brown of Ohio said in his opening statement. “Shareholders of all sizes deserve to have every tool available to hold executives accountable.”
Alongside changes to the shareholder proposal process, organizations like the U.S. Chamber of Commerce are also seeking regulatory or legislative action to rein in the influence of so-called proxy advisory firms, which provide voting recommendations to shareholders.
They say investors like pensions funds — which typically hold a large number of shares in a business and can have sizable influence over the outcome of a vote — rely too heavily on the research of firms like Glass Lewis and Institutional Shareholder Services.
“The conflict-ridden proxy advisory process should be reformed in a way that recognizes the rights of Main Street investors,” Chris Iacovella, chief executive officer of the American Securities Association, said in a statement.
A bipartisan group of senators previously introduced legislation to increase federal oversight of proxy advisers, and the House passed a bill requiring the firms to register with the Securities and Exchange Commission, but Brown expressed opposition to both measures.
