Clean Yield is no stranger to sticking up for things we believe in – LGBT rights, eliminating dark money in politics, stemming global warming, and wearing flannel year-round. Last week, the newest member of the Clean Yield team, Molly, went to Capitol Hill to raise our voice on the importance of protecting shareholder rights. We were part of a group organized by Ceres, a nonprofit aimed at transforming the economy to build a sustainable future, and US SIF, the Forum for Sustainable and Responsible Investment.
This topic may ring a bell. Earlier this year, we wrote about how the Financial CHOICE Act would decimate shareholder rights (https://www.cleanyield.com/right-to-file-proposals-under-threat/) and reached out to you to help by contacting members of Congress. While much of the CHOICE Act is aimed at scaling back components of the Dodd-Frank Act, a small section, Section 844, would dramatically increase the minimum requirements for shareholders to file and refile proposals. The result would be that only a very small number of very large shareholders could file at most companies. In practice, it would eliminate the right of small shareholders, such as Clean Yield’s clients, to file shareholder proposals and, in doing so, would remove the checks and balances between companies and their owners.
When someone threatens to mess with shareholder rights, we at Clean Yield speak up.
We joined with a team of investors (pictured above) that represent religious investors, family offices, individual investors, and institutional investors, all keen to protect the rights of shareholders. The team’s goal was to educate congressional staffers on the importance of shareholder rights so that they are familiar with the issue before it comes up for a vote. We met with a number of staffers supporting both Republican and Democratic senators. Some meetings were very favorable and some less so, but one meeting stands out. We met with the banking and finance advisor for a Republican senator who expressed deep concern about the fact that there are fewer companies going public in U.S markets and how this negatively impacts the economy. He wanted to understand if Section 844 would make it more or less attractive for companies to go public. We walked him through how the current shareholder proposal rules are good for the markets. They create an avenue for investors and companies to address issues/business risks at minimal cost and without regulatory or government intervention. We highlighted how the resolution process helps give many investors some confidence that there is accountability in the markets. We also pointed out that by eliminating these shareholder rights, lawmakers would be taking something of value from shareholders (when companies have two share classes, the shares with voting rights tend to trade at a premium, indicating that the market assigns monetary value to shareholder rights). If the government were to effectively remove the right for investors for file, it could be argued that the government is decreasing the value of a stock without the consent of the investor. While it is hard to know if this staffer and his senator would come out in favor of protecting shareholder rights, he certainly was giving thought to the matter.
Going to the Hill was a first step. The battle to protect shareholder rights is far from over. While the CHOICE Act is unlikely to pass through the Senate, key parts of it could be attached to other must-pass legislation. Alternatively, the SEC could decide to alter the shareholder proposal process outside of the legislative process. Just this week, the Chamber of Commerce, one of the country’s biggest lobbying organizations, put forth a list of seven recommendations for the SEC to limit shareholder rights. Proponents of limiting shareholder rights, the Chamber of Commerce and the Business Roundtable, are well resourced and focused on this issue. While we may not have their deep pockets and team of lobbyists, we do have the support of investors representing hundreds of billions of dollars and a long history of sticking up for what’s right. Rest assured that we will not rest as long as shareholder rights are under threat.Tags: protect shareholder rights, shareholder proposals, shareholder rights, Sustainable investing