Regulatory and Legal Reform

Policy and Legal

Kigali Ratification a Win for Manufacturers

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The Senate voted yesterday to ratify the Kigali Amendment—an international greenhouse gas–reduction accord that is more meaningful than any the U.S. had agreed to before. Long advocated by the NAM, this ratification is a major step forward for manufacturers and their ability to compete effectively and sustainably.

A climate-action model: In a strong bipartisan 69–27 vote, the Senate approved the amendment, a change to the 1987 Montreal Protocol that phases down the use of hydrofluorocarbons (commonly used refrigerants) in favor of more efficient next-generation alternatives.

  • The measure, which the NAM called for in its climate change roadmap, “The Promise Ahead,” “could help avoid a half-degree Celsius of global temperature increases by the end of this century,” according to POLITICO Pro’s E&E News (subscription).
  • The ratification builds on a move for which manufacturers also pushed, the 2020 legislation requiring the Environmental Protection Agency to issue rules to phase down nonessential HFCs by 85% by 2036.

Manufacturers approve: Many manufacturers were delighted by this move. “Trane Technologies applauds senators on both sides of the aisle for voting to ratify the Kigali Amendment,” Trane Technologies Chair and CEO Dave Regnery told Input.

  • “In addition to creating 33,000 U.S. jobs, stimulating $12.5 billion in new investment in the U.S. economy and boosting U.S. exports by 25%, ratifying Kigali aligns with our bold commitments to reduce emissions through sustainable innovation.”

Accountability for China, India: Critically, the legislation fortifies “our global leadership and put[s] the U.S. in a position to hold countries like China and India accountable,” NAM Vice President of Energy and Resources Policy Rachel Jones said in a communique to Congress—which was quoted by Environment & Public Works Committee Chairman Sen. Tom Carper (D-DE) on the Senate floor Tuesday.

  • The amendment will also “protect American workers, grow the economy and improve our trade balance all while encouraging further innovation to strengthen America’s technology leadership,” Jones wrote.

Inside the NAM’s advocacy: “We were able to leverage our longstanding policy experience, strategic partnerships and our depth of relationships in the Senate to adeptly navigate the ever-changing and challenging politics,” said NAM Senior Vice President of Policy & Government Relations Aric Newhouse.

  • “Ultimately, the NAM’s support and long-term engagement was able to shepherd this crucial priority for manufacturers across the finish line in a bipartisan way that doesn’t force a false choice between environmental protection and economic growth.”

The last word: “This action proves that if we work together—if we rise above politics and partisanship and focus on solving problems—we can make our vision of a brighter tomorrow into reality,” Jones said in a statement.

Policy and Legal

What Manufacturers Need from Regulatory Reform

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While smart regulations can enhance manufacturers’ competitiveness, there are far too many cases of unwieldy or unnecessary rules getting in their way. That’s why the NAM is standing up for regulatory reform and providing policymakers with a list of solutions to pursue today.

The challenge: The annual regulatory cost burden for an average U.S. firm represents 21% of its payroll, forcing manufacturers to divert resources away from important investments. For smaller manufacturers, the burden can be disproportionately painful, creating barriers to growth and development.

Our work: At the NAM, we’re advocating for a predictable regulatory agenda that is based on science and facts and that offers flexibility for innovation.

  • The NAM’s agenda, contained in its policy blueprint Competing to Win, seeks to combat the fundamental problems in our outdated regulatory system.
  • That includes ensuring that regulations focus on outcomes and rely on data; improving regulatory analysis; minimizing unnecessary burdens; strengthening industry outreach; preserving the ability of companies to grow; and reducing the abuse of our legal system.

What we’re saying: “Manufacturers in the United States should be able to grow, compete and win without being stymied by outdated and unnecessary regulations,” said NAM Director of Regulatory, Tax and Domestic Economic Policy Alex Monié.

  • “We are proud of the work that the NAM has done to reduce the burden on businesses while also protecting the men and women who make things in America.”
  • “We are committed to pressing forward so that every manufacturer can support their workforce, participate in market innovation, contribute to their communities, promote competitiveness and advance U.S. leadership.”

Learn more: Check out the NAM’s full regulatory reform agenda in Competing to Win—a strategic blueprint for the policies that manufacturers in America need to compete with the rest of the world.

Press Releases

Manufacturers Unveil Competitiveness Agenda Ahead of Midterm Elections

“Competing to Win” offers a path for bringing the country together around policies, shared values and a unified purpose

Washington, D.C. – Ahead of the midterm elections, the National Association of Manufacturers released its policy roadmap, “Competing to Win,” a comprehensive blueprint featuring immediate solutions for bolstering manufacturers’ competitiveness. It is also a roadmap for policymakers on the laws and regulations needed to strengthen the manufacturing industry in the months and years ahead.

With the country facing rising prices, snarled supply chains and geopolitical turmoil, manufacturers are outlining an actionable competitiveness agenda that Americans across the political spectrum can support. “Competing to Win” includes the policies manufacturers in America will need in place to continue driving the country forward.

“‘Competing to Win’ offers a path for bringing our country together around policies, shared values and a unified purpose,” said NAM President and CEO Jay Timmons. “The NAM is putting forward a plan filled with ideas that policymakers could pursue immediately, including solutions to urgent problems, such as energy security, immigration reform, supply chain disruptions, the ongoing workforce shortage and more. Manufacturers have shown incredible resilience through difficult times, employing more workers now than before the pandemic, but continued resilience is not guaranteed without the policies that are critical to the state of manufacturing in America.”

The NAM and its members will leverage “Competing to Win” to shape policy debates ahead of the midterm elections, in the remainder of the 117th Congress and at the start of the 118th Congress—including in direct engagement with lawmakers, for grassroots activity, across traditional and digital media and through events in key states and districts as we did following the initial rollout of the roadmap in 2016.

The document focuses on 12 areas of action, and all policies are rooted in the values that have made America exceptional and keep manufacturing strong: free enterprise, competitiveness, individual liberty and equal opportunity.

Learn more about how manufacturers are leading and about the industry’s competitiveness agenda at nam.org/competing-to-win.

-NAM-

The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs more than 12.8 million men and women, contributes $2.77 trillion to the U.S. economy annually and accounts for 58% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org

Regulatory and Legal Reform

Manufacturers Sue SEC on Proxy Rule Rescission

“The SEC has failed to provide any substantive justification for its dramatic about-face”

Washington, D.C. – The National Association of Manufacturers filed a lawsuit in federal court today challenging the Securities and Exchange Commission’s rescission of critical components of its 2020 rule on proxy advisory firms. Following the submission, NAM Chief Legal Officer Linda Kelly released the following statement:

“The SEC has failed to provide any substantive justification for its dramatic about-face. Manufacturers depend on federal agencies to provide reliable rules of the road, and the SEC’s arbitrary actions to rescind this commonsense regulation clearly violate its obligations under the Administrative Procedure Act. The NAM Legal Center is filing suit to preserve the 2020 rule in full and protect manufacturers from proxy advisory firms’ outsized influence.”

Background:

The NAM has long called for increased oversight of proxy advisory firms. In July 2020, the SEC issued final regulations to enhance transparency and accountability for proxy firms, a move NAM President and CEO Jay Timmons called a “long-sought, major win for the industry and millions of manufacturing workers.” In October 2020, the NAM filed a motion to intervene in ISS v. SEC (ISS’s attempt to overturn the rule) in support of these reforms. A summary judgment hearing in ISS v. SEC is scheduled for July 29, 2022.

In June 2021, the SEC announced that it was suspending enforcement of the 2020 rule; the NAM voiced concern about the agency’s “efforts to bypass the required notice-and-comment process to keep this lawfully issued rule on ice indefinitely.” The NAM later filed suit against the SEC in October 2021 challenging this unlawful suspension. The Western District of Texas held a summary judgment hearing in NAM v. SEC on May 25, 2022; we await the court’s opinion.

In November 2021, the SEC proposed to rescind critical portions of the 2020 rule, a proposal the NAM called “deeply troubling.” The SEC finalized its rescission rule in July 2022, a move that Timmons said “epitomizes ‘arbitrary and capricious’ rulemaking.”

-NAM-

The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs more than 12.8 million men and women, contributes $2.77 trillion to the U.S. economy annually and accounts for 58% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org.

Policy and Legal

SEC Proposes New Shareholder Rule

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The U.S. Securities and Exchange Commission has proposed a new rule that could undermine key reforms the NAM secured in 2020—and empower activist shareholders.

The background: Shareholders in public companies generally have the right to submit proposals to corporate proxy ballots.

  • These proposals, which voice shareholders’ views on business and governance topics relevant to the company, can then receive a vote by the full shareholder base.
  • To qualify for inclusion on the ballot, shareholder proposals must meet certain criteria.

Submission thresholds: In 2020, the NAM supported—and the SEC finalized—new thresholds to make it more difficult for activist shareholders to place politically motivated proposals on the proxy ballot.

  • These thresholds require higher degrees of ownership and shareholder support before a proposal can be submitted or resubmitted.

The new rule: The SEC’s proposal leaves the 2020 thresholds in place, but it creates other opportunities for activists and limits the tools companies can use to prevent them from hijacking the proxy ballot.

  • Currently, companies can exclude shareholder proposals that have already been substantially implemented, are duplicative of other proposals on the proxy ballot or are resubmissions of previous failed proposals. Each of these abilities would be limited significantly under the proposed rule.
  • For example, rather than being allowed to exclude all duplicative proposals, companies would only be permitted to exclude virtually identical proposals that address the same subject matter, seek the same objective and do so by the same means.

What we’re saying: “The NAM is concerned that the SEC’s proposed rule may prioritize the agendas of activists over the needs of long-term shareholders investing for the future,” said NAM Senior Director of Tax and Domestic Economic Policy Charles Crain.

  • “We look forward to working with the SEC in the coming months to ensure that manufacturers’ shareholder engagement can continue to focus on issues critical to business growth and investor returns.”

Next steps: Comments on the proposed rule are due to the SEC by Sept. 12.

Policy and Legal

NAM Fights Back Against SEC About-Face

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As the U.S. Securities and Exchange Commission turns its back on a bipartisan agreement on proxy advisory firms, the NAM is taking action.

The background: In 2020, the NAM supported—and the SEC finalized—a major rule to increase oversight and transparency with regard to proxy advisory firms. These unregulated and unaccountable entities influence publicly traded companies by recommending how institutional asset managers should vote in corporate proxy contests.

  • Since last January, the SEC’s new leadership has taken steps to undermine and reverse the 2020 rule. The NAM has filed suit against the SEC for refusing to enforce the 2020 rule, called on the agency to provide “reliable rules of the road” and opposed a proposed rule to reduce proxy firm oversight.

The new rule: Yesterday, the SEC released a final rule that rescinds many of the critical reforms the NAM secured in 2020. Specifically, the new rule removes requirements for proxy firms to engage with impacted companies and their shareholders, and it weakens the 2020 rule’s anti-fraud provisions.

Arbitrary and capricious: The SEC is making these substantial changes absent any new evidence—because the 2020 rule was never allowed to take effect. It has also failed to articulate a satisfactory policy justification. Federal agencies are prohibited from issuing regulations that are “arbitrary and capricious”—an easy descriptor for the SEC’s actions given the agency’s abrupt and unjustified about-face.

NAM in action: The NAM announced yesterday that it plans to file suit against the SEC to preserve the 2020 rule. It will argue that the SEC’s decision to change course without allowing the 2020 rule to take effect and be fairly evaluated epitomizes arbitrary and capricious rulemaking.

What we’re saying: “The SEC has offered no justification for abandoning a decade’s worth of bipartisan, consensus-driven policymaking,” said NAM President and CEO Jay Timmons. “This move will undoubtedly harm the competitiveness of publicly traded manufacturers, and it will hurt Main Street investors.”

Press Releases

Manufacturers to Sue SEC on Proxy Advisory Firm Rule

“The SEC has offered no justification for abandoning a decade’s worth of bipartisan, consensus-driven policymaking”

Washington, D.C. – Following the Securities and Exchange Commission’s announcement that it is rescinding critical reforms designed to protect publicly traded manufacturers and their investors from unregulated and unaccountable “proxy advisory firms,” National Association of Manufacturers President and CEO Jay Timmons released the following statement:

“The SEC has offered no justification for abandoning a decade’s worth of bipartisan, consensus-driven policymaking. This move will undoubtedly harm the competitiveness of publicly traded manufacturers, and it will hurt Main Street investors. The SEC’s decision to change course without allowing the 2020 rule to take effect and be fairly evaluated epitomizes ‘arbitrary and capricious’ rulemaking. The NAM will be filing suit in the coming weeks to preserve the 2020 rule’s commonsense reforms and protect manufacturers from proxy advisory firms’ outsized influence.”

Background:

The NAM has long called for increased oversight of proxy advisory firms. In July 2020, the SEC issued final regulations to enhance transparency and accountability for proxy firms, a move Timmons called a “long-sought, major win for the industry and millions of manufacturing workers.” In October 2020, the NAM filed a motion to intervene in ISS v. SEC (ISS’s attempt to overturn the rule) in support of these reforms.

In June 2021, the SEC announced that it was suspending enforcement of the 2020 rule; the NAM voiced concern about the agency’s “efforts to bypass the required notice-and-comment process to keep this lawfully issued rule on ice indefinitely.” The NAM filed suit against the SEC in October 2021 challenging this unlawful suspension. Oral arguments in NAM v. SEC took place in May 2022.

In November 2021, the SEC proposed to rescind critical portions of the 2020 rule, a move the NAM called “deeply troubling.” The NAM filed comment opposing the recission proposal in December 2021.

-NAM-

The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs more than 12.7 million men and women, contributes $2.71 trillion to the U.S. economy annually and accounts for 58% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org.

Press Releases

Manufacturers: Court’s Decision Affirms EPA’s Authority to Issue Appropriate Greenhouse Gas Regulations

Washington, D.C. – Following the Supreme Court’s 6–3 decision in West Virginia vs. EPA, National Association of Manufacturers President and CEO Jay Timmons released the following statement:

“Manufacturers share a deep commitment to protecting our planet and our people, and manufacturing innovation holds the key to solving the generational challenge of climate change. The court’s decision affirms the Environmental Protection Agency’s authority to issue appropriate greenhouse gas regulations while providing a reminder that the agency must stay within the guardrails delegated by Congress. As some of the largest electricity consumers and as electricity generators, manufacturers are ready to work with the EPA to deliver innovative and balanced solutions that protect our environment and our competitiveness as it considers next steps.”

Background: Earlier this week, the NAM along with 42 state partners sent President Biden a letter highlighting the importance of affordable, reliable electricity for manufacturers to remain competitive. It signals manufacturers’ eagerness to work with policymakers on the important decisions and planning surrounding the future of the electrical grid and broader energy policy.

-NAM-

The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs more than 12.7 million men and women, contributes $2.71 trillion to the U.S. economy annually and accounts for 58% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org

News

NAM Urges Changes to Climate Disclosures Rule

As the Securities and Exchange Commission considers a prescriptive rule that imposes significant and burdensome climate-related disclosure obligations on public companies, the NAM is pushing back. It is fighting for critical changes that will support manufacturers’ leadership on climate change.

The background: Manufacturers have long been leaders on climate solutions, working to create the technologies and processes needed to combat climate change while also providing material information about their climate-related efforts to investors.

  • But a recent rule proposed by the SEC would mandate that companies, large and small, report reams of complex climate-related information, even when that information may not have any impact on their financial performance or operations.

The rule: The proposed rule, which the SEC released in March, would require qualitative descriptions of companies’ climate-related risks and strategies as well as quantitative reporting of their greenhouse gas emissions and any climate-related impacts on their financial statements.

  • The result would be an unworkable framework that does not align with current practices—imposing an enormous burden on manufacturers across the country.
  • Additional information can be found about the rule here and about the NAM’s engagement with the SEC on climate disclosures here.

The response: The NAM has laid out a series of necessary changes that the SEC must make to reduce the compliance costs and liability risks associated with the rule’s requirements. Our recommendations will align the rule more closely with current climate reporting practices—decreasing burdens on public companies and increasing information utility for investors. Specifically, the NAM is calling on the SEC to:

  • Delay annual GHG emissions reporting, granting manufacturers time to collect and verify data for a midyear report (rather than the proposed February deadline).
  • Strike disclosure of Scope 3 emissions, which requires tracking emissions data through the supply chain. While some manufacturers are already working to understand these emissions, the data collection, estimation and reporting methodologies are still evolving. At a minimum, the SEC should provide more flexibility for companies subject to the Scope 3 requirement.
  • Rescind accounting changes that would require climate impact analyses of companies’ consolidated financial statements on a line-by-line basis.
  • Adjust the climate-related risk disclosures and Scope 1 and Scope 2 emissions reporting requirements to make the provisions less prescriptive and more aligned with existing company practices.
  • Fine-tune the guidelines for reporting on climate-related goals to avoid penalizing companies that set ambitious targets.
  • Remove requirements that companies disclose competitively sensitive information about the internal tools they use to understand and plan for climate risks, scenarios and activities.

The last word: “The SEC’s climate rule as written would be harmful for both large and small manufacturers and unhelpful for investors,” said NAM Senior Director of Tax and Domestic Economic Policy Charles Crain. “The NAM is committed to supporting our members in their efforts to combat climate change and inform investors about this critical work, and the recommendations we’ve offered present an important step toward that goal.”

Watch: NAM President & CEO Jay Timmons joined CNBC to discuss the impact of the proposed rule.

Policy and Legal

NAM Pushes for Smart SEC Cyber Rule

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The U.S. Securities and Exchange Commission has proposed a rule that would impose new cybersecurity disclosure requirements on manufacturers—and the NAM is pushing to make those requirements work better.

The background: The SEC issued guidance in 2018 telling public companies what information about their cybersecurity protections they should provide to investors, but the SEC now feels that more disclosure is warranted.

The requirements: The SEC has proposed a rule that would require two different kinds of disclosures from public companies:

  • Cybersecurity incidents: If a manufacturer experiences a material cybersecurity incident like a breach or a hack, the company would have four days to make a public disclosure describing the nature of the incident, what systems were implicated and how the company is responding.
  • Governance and risk management: The proposed rule would require manufacturers to disclose the processes they use to identify and guard against cybersecurity risks, with information on their procedures and personnel.

The problem: SEC disclosures are public—and by requiring detailed disclosures about cybersecurity processes and incidents, the proposed rule could force manufacturers to provide a roadmap to potential hackers and cyber attackers.

  • At the same time, the inflexible four-day window for reporting cybersecurity incidents means that manufacturers would be required to disclose information about attacks even if an incident is ongoing or the subject of a law enforcement investigation.
  • This could potentially interfere with efforts to stop the attack, risking the exposure of sensitive information or implicating national security.

Our move: The NAM has urged the SEC to make commonsense adjustments to the rule in order to protect manufacturers from attacks and give companies the flexibility to respond to cybersecurity incidents appropriately.

  • Specifically, the NAM has called on the SEC to adopt a more principles-based approach to the proposed risk management disclosures, allow for greater flexibility with respect to incident reporting and coordinate with U.S. law enforcement and national security experts when finalizing the rule.

Our take: “A final rule that requires timely and accurate reports without instituting one-size-fits-all mandates will ensure that shareholders have access to useful information without exposing businesses, investors, and all Americans to increased risks,” said NAM Managing Vice President of Tax and Domestic Economic Policy Chris Netram. “The NAM strongly supports a flexible approach to cybersecurity reporting, and manufacturers respectfully encourage the SEC to promulgate a final rule that allows public companies to both inform and protect their shareholders.”

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