The SEC Tightens Restrictions on Shareholder Proposals in a Move to Better Align the Interests of Proposing Shareholders With Those of the Company

    October 2020

    On September 23, 2020, the Securities and Exchange Commission (SEC) voted 3-2 to adopt amendments to update its shareholder proposal rule (Rule 14a-8 of the Securities Exchange Act of 1934), which governs the process through which shareholders may submit proposals for inclusion in a company’s proxy statement.

    The amendments increase the minimum thresholds for shareholders to submit and to resubmit proposals for inclusion on corporate ballots. Proponents of such a change have argued for years that the thresholds required in order to submit proposals have been too low, encouraging frivolous proposals, or proposals that are meaningful to a small subset of shareholders without regard to broader corporate interests. Shareholder activists, however, have steadfastly resisted raising of the thresholds, citing concerns that such a move could silence the voices of small investors.