Letter from Investors to SEC Investor Advisory Committee

 October 24, 2024 

Brian L Schorr, Chair 

Colleen Honigsberg, Secretary 

Investor Advisory Committee 

Securities and Exchange Commission 

100 F Street, N.E. 

Washington, D.C. 20549 

Dear Chair Schorr and Secretary Honigsberg, 

 We are writing to the Investor Advisory Committee (Committee) concerning the discussion 

about shareholder proposals and the Securities and Exchange Commission’s (SEC) Rule 14a-8 

that took place at the Committee’s September 19, 2024, meeting. 

 Based on the Committee’s agenda for the meeting, it seems the original intent of the 

session was to discuss the implications of securities litigation, including the lawsuit of Exxon v. 

Arjuna. The impact of the suit certainly merits the attention of the Committee, particularly for its 

chilling effect on investors’ ability to raise material concerns with our companies through the 

shareholder proposal process. 

 The focus on shareholder proposals merits continued engagement by the Committee.  

Shareholder proposals are a vital right of shareholders, and we urge the Committee to defend 

these rights against current and what we believe to be misguided and misleading assaults.   

 Investors file shareholder proposals that they believe address important concerns. Voting 

outcomes provide a practical assessment of whether a significant number of the company’s other 

investors also view the issues as important. In this way, the company is able to gauge the 

collective voice of all of its investors, not just the largest investors that they may otherwise be 

engaging with, and take that collective view into account in determining what issues are material 

to its “reasonable investors”. 

 In the last year, the number of environmental and social shareholder proposals actually 

dropped, if anti-ESG proposals are excluded. In our view, the modest growth in environmental 

and social shareholder proposals over the last several years reflects the fact that major enterprise 

and systemic risks posed by our companies threaten the economy and our portfolios, as well as 

the quality of life of communities around the globe. Informed investors are often the first movers 

on addressing a range of risks relevant to their investments, long before such risks are addressed 

by government regulations. The market prices these risks, often based on incomplete information 

and disclosure, and voting on shareholder proposals is an essential investor tool to improve the 

baseline of available information from issuers on issues such as climate risk management and 

human rights due diligence as well as emerging topics such as the ethical use of artificial 

intelligence and the impact of corporate policy on biodiversity. 

 The SEC’s Rule 14a-8 and the SEC Staff’s administration is a dynamic process. By and 

large it is working effectively to allow shareholders to express our collective voice on important 

issues and to screen out inappropriate proposals.  It can always be fine-tuned.  

 We hope that when the Committee further explores this topic, it will invite proponents and 

their counsel to provide a more complete picture of the “what and why” of shareholder 

proposals. In the meantime, we enclose some notes to provide some additional perspective on 

some of the points raised in the meeting.    

Sincerely, 

Frederick Alexander, The Shareholder Commons 

John Chevedden 

Lauren Compere, Boston Common Asset Management, LLC  

Danielle Fugere, As You Sow 

Julie Goodridge, NorthStar Asset Management, Inc. 

Julie Gorte, Impax Asset Management 

John Harrington, Harrington Investments, Inc. 

Michael Kramer, Natural Investments PBLLC 

Sanford Lewis, Shareholder Rights Group  

Katie McCloskey, Mercy Investment Services 

Jim McRitchie, CorpGov.net 

Brandon Rees, AFL-CIO 

Tim Smith, Interfaith Center on Corporate Responsibility 



Full letter and Appendices

Vanguard's Valuable Voting Choices

Cynthia Simon, Policy Director

Shareholder Rights Group

 


Bloomberg opinion columnist Matt Levine misses the mark in his September 24, 2024 commentary on Vanguard’s pass-through voting option for its investors. Levine’s assertion that investor votes on shareholder proposals are of little value and merely symbolic ignores the impact these proposals have actually had on corporate behavior.  It also fails to account for the sheer heft providing voting choice to Vanguard’s 50 million investors[1] could have on voting outcomes. 

 

While correct that proposals are not binding on companies, this does not mean their value is symbolic. In many cases, companies choose to respond positively. In fact, over the last 10 years, an average of roughly 40% of proposals each year were withdrawn because the company agreed in some part to the request being made.[2] When there is a vote, the outcome can give a company a clear signal of the sentiment of its larger investor base. Proposals have led to many of the best practices in protecting investor rights as owners of companies, such as independent directors and majority voting, as well as an increase in sustainability reporting. Proposals have raised the visibility of issues such as climate change, human rights and workforce health and safety in cases where companies have chosen to ignore them. Climate change in particular has been a frequent topic of proposals.

 

With 24% of respondents in Vanguard’s pilot choosing an ESG strategy, the company’s commitment to expand participation could, over time, shift a not inconsequential amount of its $9.5 trillion in assets[3] to support, say, proposals on climate change--an issue, by the way, of concern to environmental activist celebrities Ryan Reynolds, Oprah and Taylor Swift, who just might be willing to put their name on a Voting Choice option for an affordable amount. Shareholder proposals are that valuable.

 


James McRitchie  

Shareholder Advocate

Corporate Governance



You recently argued that proxy voting is too hard and, therefore, not rational for retail investors. But the iconikapp.com voting service automates it, allowing even small retail investors to follow other policies as pictured below or create their own. The system has automatically voted hundreds of proxies for me. Here's an example: Sierra Club policy. 


"Rational apathy" isn’t rational when setting up your own proxy voting policy is this easy.  I love most of what you write but you are outdated on this issue. Yes, iconik's system isn’t perfect, but it gets most people 90% there and only “wastes” the few minutes it takes to set it up initially. No further effort is needed. 


This technological development is even more important considering Laster’s decision in McRitchie v Zuckerberg that directors have a fiduciary duty to the company and its shares — shareholders are “incidental.”  We become a little less incidental to directors when we vote. 


 


 

  

A step backward for holding companies accountable

by Christopher Cox, Wisconsin Examiner

September 9, 2024

Congressman Bryan Steil is working to limit investors’ ability to police their companies. Whether the problem is opioid addiction, climate pollution or toxic drinking water, blocking investors from addressing these issues ultimately hurts Wisconsin communities. Yet legislation introduced by Congressman Steil, the 1st District Republican from Janesville, would hobble investors’ ability to drive responsible corporate behavior.

The bill, scheduled for a hearing Tuesday, would eliminate the federal requirement that shareholders’ proposals on such issues be presented for fellow investors to vote on in a company’s annual meeting announcement called the proxy statement. Shareholder resolutions offer  one of the most effective tools investors have to hold companies and their boards of directors accountable for activities that are risky to both investors’ assets and our communities.  

Take, for example, the opioid crisis. More than 10,000 individuals in our state have died from an opioid overdose since the year 2000.  The opioid epidemic has devastated Wisconsin families and communities across all races and many age groups in both rural and urban communities.

Pharmaceutical companies, drug middlemen and retail chains profit from opioid medications. However, with the harm that opioids pose to our communities, the corporate suppliers of opioids face significant risks of lawsuits and ethical scandals. From 2017-2023, a group of 67 investors, including  my organization, filed more than 100 shareholder proposals directed at 32 of these companies. The proposals filed by members of Investors for Opioid and Pharmaceutical Accountability sought to increase the oversight by boards of directors to independently investigate and manage opioid-related risks.

Climate risk shareholder proposals focus on a company’s pollution reduction goals and other company plans to adapt their business to a clean energy economy. 

Since 1950, our state’s average temperatures have already risen by at least two degrees Fahrenheit. Ice cover on the Great Lakes is forming later and melting sooner. More frequent heavy rainstorms are causing flooding and waterlogged agricultural soils. The extreme weather anticipated in future decades poses grave danger to public health in cities and to harvests in farmland communities. 

During the 2024 annual meeting season over 200 climate-related proposals went to vote at companies across the U.S., signaling just how important investors consider the issue to be in terms of risks to both the companies in which they have invested and our collective future.

Finally, investors have sought to discourage companies from contributing to toxic chemical contamination of drinking water. Poly- and perfluoroalkyl substances (PFAS) — so-called “forever chemicals” — have been linked to increased risk of some cancers, lower birth weights, harm to immune and reproductive systems and altered hormone regulation. More than 50 cities in Wisconsin have discovered PFAS in their drinking water, including Superior, La Crosse, Eau Claire, Wausau, Madison and Milwaukee. Some areas in our state are currently forced to use bottled water due to PFAS contamination. 

The origins of the PFAS problem lie in boardrooms where corporate managers made irresponsible decisions to continue producing these chemicals while ignoring or downplaying the related risks. Shareholder proposals have attempted to make companies act more responsibly in how they manage these chemicals. For instance, in 2006, DuPont investors brought a shareholder proposal asking DuPont to report on the feasibility of phasing out the use of a PFAS chemical in the production of Teflon and other products. As a result of shareholder proposals at McDonald’s in 2020 and Proctor & Gamble in 2024, these companies agreed to manage and reduce the use of PFAS in their products. 

Yet Congressman Steil’s legislation would eliminate the right of shareholders to have such proposals appear on corporate proxy statements — preventing shareholders from policing their own companies for risks to both their investments and our communities. 

Far from protecting investments, Congressman Steil’s proposed legislation would remove a cost-effective tool for maintaining investment value and improving the lives of Wisconsinites. 


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