Coalition says current rules damage shareholder interests and company management
A coalition of business groups has petitioned the SEC to make it harder for shareholders to resubmit proposals that were already rejected in previous proxy votes.
The US Chamber of Commerce, the National Association of Corporate Directors, the American Petroleum Institute and other groups have asked the SEC to ‘significantly’ raise the minimum percentage of favorable votes required in a failed vote for it to be resubmitted.
The coalition warns of the ‘unacceptable negative consequences for investors of the overwhelmingly verbose and often senseless assault on the ability of shareholders and portfolio managers to focus on how to manage their securities investments wisely’ due to increased repeated submissions. In its petition, it also warns of ‘the diversion of serious management focus away from the best interests of shareholders.’
Under current regulations, a proposal may be resubmitted for the first time if it received at least 3 percent of the votes cast. The minimum rises to 6 percent for the second vote and 10 percent for the third. The threshold then remains permanently at 10 percent.
‘This [in effect] results in so-called Minoritarianism: the tyranny of a minority in which 10 percent of shareholders, motivated by concerns unrelated to enhancing shareholder value, can override the expressed will of 90 percent of the shareholders, indefinitely,’ the coalition writes in its petition to the SEC.
The coalition, which also includes the National Black Chamber of Commerce, the American Insurance Association, the Latino Coalition, the Financial Services Roundtable and the Center on Executive Compensation, does not make a specific request for new percentages but it does mention a failed proposal in 1997 that the commission require a threshold of 6 percent in the first year, 15 percent in the second and 30 percent in the third.
