SEC reverses stance on social points – company insurance

(Reuters) – The US Securities and Exchange Commission released new personnel guidelines on Wednesday that could make it difficult for companies to keep shareholder proposals on topics such as employee diversity or climate from voting at annual meetings.

The new bulletins replace the Trump-era guidelines, which gave companies more room to propose suggestions on hot social issues, changes that critics say were aimed at silencing investor voices.

Among other changes, employees will now take greater account of the sociopolitical significance of a shareholder proposal and recognize "that proposals that target details or encourage time frames or methods do not per se constitute micromanagement" or grounds for exclusion, says the bulletin published by the division of Corporation Finance from the SEC.

"The right to put voting proposals to other shareholders is an important part of securities laws," SEC chairman Gary Gensler said in a statement.

"Today's bulletin will provide companies and shareholders with more clarity on these matters so they can better understand when exclusions may or may not apply," he said.

Shareholder voting rights have become a major point of contention as more investors have pushed companies to address social and environmental issues and have gained more support from top investment firms.

According to the regulations on representation, shareholders who wish to submit a voting proposal must first submit it – months before the general meeting itself – to the proxy of a company. Separate SEC rule changes from 2020 that increased the stake required to file a resolution remain in place but face litigation.

Sanford Lewis, director of Shareholder Rights Group, which represents socially minded investment firms that often make proposals, praised Wednesday's changes.

"You have removed a number of annoying interpretations that have made it more difficult, uncertain and more expensive for shareholders to submit proposals," he said in an interview.

The two Republican representatives of the five-member commission, Hester Peirce and Elad Roisman, said in a joint statement: "The reasons for today's action are a bit mysterious," although the practical implications of the changes are unclear.

Sorting out which proposals can be excluded from corporate mandate "has long been an insatiable time-waster" for the agency, the two commissioners wrote, adding that the new bulletin "does not make their jobs any easier".

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