July 25, 2017


Changes Would Help Protect Investors, Incentivize Businesses to Go Public, and Generate Economic Growth

WASHINGTON, D.C. – The U.S. Chamber of Commerce Center for Capital Markets Competitiveness (CCMC) today released a new paper on shareholder proposal reform, which contains a set of recommendations for the SEC on fixing the broken Rule 14a-8 system in order to protect investors and make the public company model more attractive.

The paper details how the shareholder proposal system was designed to allow investors to put forth constructive ideas on improving a company’s governance and performance, but the guardrails put in place to protect investors have steadily weakened. As a result, a small subset of investors has come to dominate the system, while a vast majority of investors bear the costs, and more and more U.S. companies feel the unnecessary weight of going public.

“Public companies serve as a linchpin for creating jobs, generating wealth for Main Street families, and growing our economy, but today, the U.S. has about half the number we did two decades ago,” said Tom Quaadman, executive vice president of CCMC. “The good news is there are steps we can take and reforms we can make so that going public and staying public are more appealing. It’s time to take a fresh look at SEC rules that, regrettably, tilt the scales in favor of a small subset of activists at the expense of investors as a whole. These reforms would bring incremental but important improvements to the public company model, which needs a serious boost.”

In order to protect investors and promote the long-term value of public companies, the U.S. Chamber offers seven recommendations to the SEC for reforming Rule 14a-8 of the Securities Exchange Act:

  • Amend the Resubmission Rule to raise the thresholds for support that proposals must receive in order to be eligible for resubmission.
  • Withdraw Staff Legal Bulletin 14H(CF) to restore certainty under an exemption allowing exclusion of a proposal if it conflicts with one of the company’s own proposals.
  • Offer more transparency to investors by requiring proponents to provide sufficient disclosure regarding their economic interests and objectives.
  • Reassert the “relevance rule” by allowing excludability of a proposal if the subject matter impacts less than 5% of a company’s total assets and 5% of net earnings.
  • Prohibit the use of images, photos, or graphs as part of proposals, while maintaining the ability of proponents to include a hyperlink for a website they wish to include.
  • Provide market participants with more certainty regarding its policing of a provision dealing with proposals that relate to a redress of a personal claim or grievance.
  • Allow for the exclusion of proposals that include materially false or misleading statements.

The report is available online in its entirety.

Since its inception in 2007, the Center for Capital Markets Competitiveness has led a bipartisan effort to modernize and strengthen the outmoded regulatory systems that have governed our capital markets. The CCMC is committed to working aggressively with the administration, Congress, and global leaders to implement reforms to strengthen the economy, restore investor confidence, and ensure well-functioning capital markets.

The U.S. Chamber of Commerce is the world’s largest business federation representing the interests of more than 3 million businesses of all sizes, sectors, and regions, as well as state and local chambers and industry associations.