Here is the letter we have created for you to customize and include when you sign the petition:
DATE, 2019
The Honorable Jay Clayton
Chairman
Securities and Exchange Commission
100 F Street NE
Washington, DC 20549
Vanessa A. Countryman
Secretary, Securities and Exchange Commission
100 F Street NE
Washington, DC 20549-1090
Via Electronic Submission
Re: Comments on Proposed Amendments to Exemptions from the Proxy Rules for Proxy Voting Advice (File No.: S7-22-19) and Proposed Amendments to Procedural Requirements and Resubmission Thresholds Under Exchange Act Rule 14a-8 (File No: S7-23-19)
Dear Chairman Clayton and Secretary Countryman:
[Organization Name] submits the following comments in response to the Securities and Exchange Commission’s proposed rulemakings published in the federal register on December 4, 2019 (84 FR 66518 and 84 FR 66458) concerning Proposed Amendments to Exemptions from the Proxy Rules for Proxy Voting Advice and Proposed Amendments to Procedural Requirements and Resubmission Thresholds Under Exchange Act Rule 14a-8.
[Introduce yourself and why you are interested in these amendments.]
The founding purpose of the Securities and Exchange Commission is to protect investors. The SEC’s proposed rules have no apparent purpose other than to curtail the rights of investors. One proposal severely limits the ability of individual and smaller institutional investors like us to file shareholder resolutions at the companies in which they invest. The second suppresses the voices of independent proxy advisory firms who make informed participation possible for small shareholders. The proposed rules are prejudicial and unnecessary, and we urge the SEC to withdraw them.
The Proposed Rules Undermine the Rights of Shareholders
The threshold to file a shareholder proposal was intentionally set at a level which allows small institutional and individual shareholders alike to engage with the governing bodies of a corporation, because it has long been recognized that the size of a shareholder’s investment in a company does not dictate the quality of the shareholder’s idea. Shareholders big and small can and have made valuable contributions to the companies that they own. Proposals from small shareholders, both individually and in the aggregate, have resulted in significant corporate advancements in gender parity, racial diversity, transparency, labor practices, environmental policies, confronting climate change, and more. Shareholder resolutions are a powerful way to encourage corporate responsibility and discourage practices that are unsustainable, unethical, and increase a company’s exposure to legal and reputational risk.
[Describe the issues that are important to you and/or your organization, and past successes with the shareholder proposal process.]
The proposed amendments to procedural requirements and resubmission thresholds under rule 14a-8 exclude smaller investors, dilute the diversity of ideas, and raise serious concerns about the equality of the system. They do this first, by raising the ownership requirements from $2,000 up to $25,000, for investors who have owned company shares for one year – a 1200% increase. If held for two years, the amount is $15,000 and for three years, the level is $2,000. In particular, these amounts conflict with the average holdings for shareholders with diversified portfolios, and place proposals out of reach for most mainstream investors.
On top of that, the proposed amendments make it impossible for small shareholders to aggregate their shares with other small investors to meet the minimum stock investment allowed to introduce a proposal. Thus, even if a majority of shareholders adopt a resolution, the company does not have to implement it. This is undemocratic in the extreme and seriously undermines shareholders’ rights to participate in decisions that affect their investments.
The Proposed Rules Are Discriminatory Against Average Investors
Proxy advisory firms help average investors meet their fiduciary responsibilities by providing independent, efficient and cost-effective research services to inform their proxy voting decisions. The proposed amendments, which hamper and prevent investor’s reliance on their agents, are unduly burdensome particularly on average shareholders.
The proposed rules would mandate that the shareholders who wish to put forth a proposal make themselves available to the company for dialogue in person or by phone. This infringes on investors’ rights to select an agent to represent their interests, and is unnecessary to “protect” shareholders, as those agents are bound by a fiduciary duty to their clients. Moreover, the agency has failed to show that there is a documented problem requiring this extremely burdensome measure.
Additionally, the proposed rules would not allow an investor or a representative to offer more than one shareholder proposal per meeting – even if the proposal is presented on another shareholder’s behalf. A shareholder-proponent would not be permitted to submit one proposal in his or her name and simultaneously serve as a representative to submit a different proposal on another shareholder's behalf for consideration at the same meeting. This undermines the role of investment advisors, who may represent several clients with different concerns about the same company, who would be forced to choose which proposal to put forward. It also makes it far more difficult, if not impossible, for most average investors to dialogue with management through the shareholder engagement process.
There Are No Problems with the Existing Rules
The existing resubmission thresholds are effective at screening out proposals considered irrelevant or ill-advised by most shareholders. There is no clear and widespread problem requiring the SEC to propagate a lengthy and costly rulemaking. This rulemaking is arbitrary and capricious and detrimental to the rights of shareholders. We urge the SEC to withdraw the proposed rules.