Center Presses for Legislation to Update Resubmission Thresholds for Shareholder Proposals

June 08, 2018

The Association's Center On Executive Compensation joined several other business groups in sending a letter supporting H.R. 5756, which would instruct the Securities and Exchange Commission to require higher levels of support for shareholder proposals in order for their proponents to resubmit them during subsequent proxy seasons.
 
Under current SEC rules, shareholder proposals with “substantially the same subject matter as another proposal” previously voted on in the past five years must obtain specific levels of shareholder support to be eligible to be voted on again. 

Shareholder proposals that obtain only 10 percent support can be voted on annually in perpetuity, per the SEC framework.  According to Center On Executive Compensation data, for S&P 500 companies, more than one in three shareholder proposals voted on in 2018 was a repeat proposal that had been previously voted on by shareholders. 

H.R. 5756 would increase the threshold levels of support required before proposals can be voted on in a subsequent year, as follows:
  • To be eligible to be voted on a second time in the five-year window, a shareholder proposal must obtain six percent support—up from three percent;

  • To be eligible to be voted on a third time in the five-year window, a shareholder proposal must obtain 15 percent support—up from six percent; and

  • After the third vote in the five-year window, a shareholder proposal must obtain at least 30 percent shareholder support to be voted on again—up from 15 percent. 
Congressman Sean Duffy (R-WI), the principal sponsor of this measure, led the effort on the proxy advisory firm legislation that was adopted by the House of Representatives in December with the Center’s support.