New measures to protect companies from shareholder proposals have been voted on by the U.S. Securities and Exchange Commission (SEC). The measures will increase the minimum value and holding period of shares investors own before introducing proposals, among other restrictions.
The proposed regulations will limit various submission thresholds that have proved invaluable in the past. Chief among them is the proposed time limit to be placed on investors before they can introduce proposals. The planned regulations will mean that investors must hold $25,000 for a year before having the right to advance a proposal, up from the $2,000 stake that investors are currently held to, the Financial Times reported. Investors who have a $2,000 stake will be required to wait three years before being able to make submissions.
Submissions made by investors will also be damaged if the proposal is unsuccessful the first time it is voted on. Unsuccessful proposals will need to maintain the approval of 10% or more before it can be revisited at a company’s next annual meeting.
Investors submitting proposals would be required to speak with the targeted board 10 to 30 days after submission.
Proxy advisers like Institutional Shareholder Services (ISS) and Glass Lewis would be required to hand over any voting recommendations to management twice, each time receiving feedback, before sharing it with shareholders. This is likely to be met with opposition from the proxy advisers. The news will be applauded by business lobbyists, however, who will see it as a win for the boardroom.
The proposed changes are being overseen by Jay Clayton, chairman of the SEC, with one official telling the Financial Times that the changes are trying “to strike the right balance between the costs associated with those proposals and the benefits that they provide.”
The regulatory changes were debated at an open meeting between the public and the five-member council on November 5 and passed. A 60-day comment period will follow.