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The United States Securities and Exchange Commission proposed a new rule on Nov. 5 that could make it harder for shareholders to submit proposals for inclusion in a company’s proxy statement.
The rule, which is open to public comment for 60 days following publication in the Federal Register, would change the eligibility requirements and raise the resubmission thresholds for shareholder resolutions.
Currently, investors who own at least 1% or $2,000 worth of a company’s stock for one year can file shareholder resolutions and add their input to various board decisions. The SEC proposes changing that eligibility threshold to a more “tiered approach.” A shareholder would be able to submit a proposal if they held $2,000 worth of a company’s stock for three years, $15,000 worth of stock for two years or $25,000 worth of stock for one year, under the new proposed rule.
Under existing rules, shareholder resolutions can be excluded from firms’ annual proxy materials if the proposals do not garner support from at least 3% of shareholders within one year of the proposal. The thresholds then rise to 6% within two years and then 10% within three years. If passed, the new resubmission thresholds would become 5% on the first submission, 15% on the second and 25% of shareholder support on the third.
Also, the rule updates the “one proposal” rule to clarify that a single person may not submit multiple proposals at the same shareholder’s meeting, whether the person submits as a shareholder or as a representative of a shareholder.
If the resolution meets all of the SEC’s criteria, the company must include the resolution in its annual proxy vote materials for its annual shareholder meeting.