What the SEC Rescinding its Shareholder Proposal Rule Could Mean for Investors (Pensions & Investments)

A new proposal from the Securities and Exchange Commission (SEC) would make corporate engagement for investors more complicated and costly by scrapping the chief federal regulation concerning shareholder proposals, according to legal experts. The SEC’s Sept. 16 proposal, which has a 60-day comment period that ends Nov. 20, could change the way pension funds and retail investors interact with the companies they own and make effecting change — on issues like board composition, CEO pay, and climate risk — at those companies more difficult. The proposal to rescind Rule 14a-8 under the Securities Exchange Act of 1934, which was adopted in 1942 and addresses when companies must include shareholder proposals in their proxy materials, would upend the 84-year-old engagement structure and give more power over the process to individual companies and state regulators. “This doesn’t mean the end of shareholder proposals,” said David Lynn, a partner in Goodwin’s Capital Markets group and chair of the firm’s Public Company Advisory practice. “It just means that if a proponent wanted to advance a shareholder proposal, they would have to conduct their own proxy solicitation…and that has costs associated with it, obviously.”

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