US SEC chairman moves to give states power over shareholder resolutions

The U.S. Securities and Exchange Commission has taken a step ​toward eliminating its requirements for shareholder ​proposals at public companies and giving new powers to states, ​a shift that would diminish the influence of investor activists.

In aregulatory notice dated Friday, the SEC said it would consider changes to the rule known as 14a-8. It establishes requirements for shareholder ‌proposals in ⁠public companies' annual ⁠proxy statements including minimum ownership.

Via e-mail, a spokesman for SEC Chairman Paul Atkins said ​he has "highlighted concerns that the SEC's Rule 14a-8 on shareholder proposals exceeds the Commission's authority and infringes upon ​state laws. To that end, the Commission is expected to consider a proposal to rescind the rule and return the role of regulating shareholder proposals to ​the states."


Investor resolutions focused on topics like carbon emissions ⁠and executive ‌roles have been the focal point of many corporate annual ​meetings, though ​support for them has fallen in recent years.

Tim Smith, senior policy ⁠adviser at the Interfaith Center on Corporate Responsibility, whose members ​often file shareholder resolutions, said the move would create confusion ​because regulations are not uniform among states, such as how many shares are needed to bring a matter to a vote.

Under a new law in Republican-controlled Texas, for instance investors could need as much as $1 million worth of shares to file a resolution, compared with just $2,000 under a current SEC requirement.

"Across the investor ‌community there will be a response to the questionable legal arguments he (Atkins) is making about the authority of the SEC," Smith said.

Cooley ​law firm ​strategist Broc Romanek said ⁠the change could lead to more votes against corporate board members as shareholders' options for expressing disapproval narrow.

"Votes against directors will be used more and more as ​other avenues are shut down," Romanek said in a telephone interview.

In a separate regulatory notice, the SEC said it would "modernize" the proxy solicitation process, which governs shareholder communications. The agency spokesman said it aims "to reflect advancement in technology and current realities of shareholder communications."

Activists say such changes could unfairly restrict speech by small investors.