Currently, if you own $2,000 in stock in a company for a year, you can submit shareholder proposals to be reviewed and voted on during annual meetings. However, the Securities and Exchange Commission (SEC) recently upped the requirements.
On Sept. 23, 2020, commissions voted 3-2 to increase shareholder stock amounts required for submitting proposals. Now, shareholders must own $25,000 of stock for a year in order to submit proposals for a vote at annual meetings. After 2 years, $15,000 and after 3 years, $2,000.
This change caused an uproar among the environmental and social justice activist groups, who claim that smaller shareholder voices will now be silenced and the update “will restrict shareholder rights.”
Over the years, activists and lobbyists have found additional ways to get big corporations to do what they want. Hitting the public sector is slow and inefficient, so they hit the private sector directly and have infiltrated many boardrooms. These activists are determined to push companies to make decisions based on their ever-changing political agendas and personal beliefs. With this updated ruling, companies will have a buffer from bullying activists and serious investors will still be heard.
The growth, some may even venture to call it exploitation, of shareholder activism is evident in the number of proposals submitted and voted on in 2020. For example, in 2010, Amazon’s proxy statement was 28 pages with only two shareholder proposals. Ten years later, Amazon presented a 75-page proxy statement with twelve shareholder proposals and only two regarded items other than social political or environmental initiatives.
The commission’s latest update will provide a buffer from activists buying stock solely to push an agenda and potentially protect long-term serious investors. This move is a positive change that will protect companies and shareholders alike from being forced into political decisions that are counterproductive to the financial and business interests of the company.
The SEC’s updates will cut through the noise of political activism veiled as corporate interest. It is a benefit to all shareholders and offers them the ability to focus on understanding proposals before them, instead of filtering through the lengthy wishlist from activists. Companies will be able to better focus on making solid business decisions that are good for the company, their employees and shareholders.