The SEC Brings Sense to the Proxy Process
The Securities and Exchange Commission changed an important standard for publicly traded companies today—the amount of stock that a shareholder must have to put proposals on the proxy ballot (which the full shareholder base votes on every year).
It might sound like a small thing, but this “threshold” is a big deal. NAM Director of Tax and Domestic Economic Policy Charles Crain broke it down in a recent interview.
The previous standard: Previously, any shareholder holding $2,000 in stock for one year could put a question on the ballot, Crain explains. Since that’s a relatively low number, activists would go to dozens of companies and buy $2,000 of stock at each—not because they were interested in the companies’ performance, but because they wanted a platform on which to debate political issues.
Here’s a data point that illustrates the extent of the problem: In 2019, just three people sponsored 38% of all shareholder proposals at Fortune 250 companies, Crain says.
The resubmission problem: Once something was on the proxy ballot, it was also easy to resubmit it the following year, adds Crain. A ballot question only needed 3% support among shareholders to stay on the ballot for a second year. If it was voted down a second time, it had to get 6% to move forward the next year and just 10% after that. “Ninety percent of shareholders could reject a measure forever, and it could still get resubmitted every year,” Crain says.
What’s changed? The SEC’s new rule creates tiered thresholds, which will give more power to long-term shareholders.
- To submit a proposal after holding stock for just one year, an investor now needs to hold $25,000 in stock.
- If an investor holds stock for two years, the threshold drops to $15,000.
- If an investor holds stock for three years, it drops to $2,000.
The rule also changes resubmission thresholds to 5% after one vote, 15% after two votes and 25% after three votes to keep a failing question on the ballot in consecutive years. Some measures take time to gain support, and the rule allows for that while taking a more commonsense approach, Crain says.
Why it matters: Holding repeated proxy votes can be time- and resource-intensive for companies, says Crain, and politically motivated proposals distract businesses and investors from the real issues that drive long-term value creation for shareholders.
The NAM’s actions: Crain says, “The NAM has called for proxy reforms for years, and we’ve engaged with both Congress and the SEC to highlight the need to modify the proxy ballot thresholds. Last November, NAM President and CEO Jay Timmons praised the SEC for proposing a rule to combat activists that ‘pressure manufacturers to focus on political issues at the expense of company growth,’ and our comments on the proposal helped lead to today’s final rule. We’ve pushed for this outcome for years—and we’re glad the SEC has come down on the right side.”
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