Reality Catches Up with the Anti-Shareholder Narrative
The political and corporate interests seeking to restrict shareholder rights are carefully cultivating a narrative that the shareholder proposal process is out of control, “hijacked” by “activist” proponents abusing the system to advance unpopular proposals at the expense of “real” investors. As a result of recent SEC rule changes, it is argued, the number of […]
Luke Morgan is a Staff Attorney at As You Sow.
The political and corporate interests seeking to restrict shareholder rights are carefully cultivating a narrative that the shareholder proposal process is out of control, “hijacked” by “activist” proponents abusing the system to advance unpopular proposals at the expense of “real” investors. As a result of recent SEC rule changes, it is argued, the number of ideological proposals has skyrocketed, vote totals have crashed, the no-action success rate has plummeted, and the number of no-action requests submitted by companies has fallen as corporations give up on the SEC being a fair arbiter of Rule 14a-8.
This is not a new narrative, but the aggressive anti-ESG movement has created a megaphone for these themes. ExxonMobil Corporation’s recent lawsuit against two shareholder proponents is an apt illustration of how these empirical claims are used to support attempts to curtail shareholder rights in the name of fixing a “flawed” process. Exxon’s complaint alleges that “the number of proposals that shareholders submit each year is rising because of how the SEC staff is applying the shareholder proposal rules,” which “can be traced only to changes in SEC staff positions,” specifically, Staff Legal Bulletin No. 14L (“SLB 14L”). Likewise, in a web page defending its lawsuit, the company asserts that SLB 14L “immediately result[ed] in a decrease in no-action relief, while the number of proposals submitted continues to increase,” while “far fewer no-action requests [are] being submitted in a system that no longer honors them.”
