NAM to SEC in Court: Get Activist Shareholders Out of Boardrooms
Activist shareholders from across the ideological spectrum have increasingly influenced public companies’ proxy ballots, and the Securities and Exchange Commission has unlawfully become their willing partner. That’s why the NAM has moved to intervene in a court case on the matter.
What’s going on: The NAM yesterday filed a motion to intervene in a case challenging the SEC’s authority to compel manufacturers to use their proxy ballots to speak about divisive social and political issues that are unrelated to a company’s business or long-term value.
- If granted intervenor status, the NAM will argue that the SEC’s rules requiring companies to include activist proposals on the proxy ballot violate federal securities law and the First Amendment.
The background: An activist group that holds shares in Kroger Co. sought a shareholder vote on a proposal to have the grocery chain issue a public report concerning its equal opportunity employment policy.
- Kroger sought permission from the SEC to exclude the proposal from its proxy ballot, which the SEC granted. The group has sued the SEC, accusing the agency of acting in an inconsistent and politically motivated manner.
Why it’s important: Though the SEC rejected this proposal, the agency often requires companies to publish shareholder proposals it deems to have “broad societal impact.
- The NAM’s motion to intervene argues that the SEC’s requirement that companies publish and respond to these proposals is a violation of the First Amendment’s prohibition on government-compelled speech.
- Furthermore, federal securities law does not permit the SEC to dictate the content of company proxy statements, so the agency’s politicization of corporate governance has unlawfully federalized issues that have traditionally been governed under state corporate law.
Unnecessary—and increasing: Forcing manufacturers to take political positions on their proxy ballots drives up costs for the companies and draws needless and unwanted controversy, the NAM says. Yet, the number of activist proposals on proxy ballots is only growing.
- “In total, 682 shareholder proposals were filed for annual meetings being held through May 31,” The Wall Street Journal (subscription) reported.
How we got here: The NAM has been urging the SEC to prioritize the needs of long-term shareholders over activists’ agendas for many years.
- The NAM opposed the SEC’s guidance requiring companies to include most environmental and social proposals on their proxy ballots.
- It also urged the agency not to move forward with a proposed rule limiting companies’ ability to exclude activist proposals.
The last word: “The corporate proxy ballot is not the appropriate venue for policy decisions better made by America’s elected representatives, and manufacturers are regularly caught in the middle as activists on the left and the right bring fights from the political arena into the boardroom,” said NAM Chief Legal Officer Linda Kelly.
- “The NAM Legal Center is standing up for manufacturers to ensure they can focus on growing their businesses, driving economic expansion and job creation and creating value for shareholders.”
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.
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