Dec. 21, 2018
Hon. Jay Clayton Chairman U.S. Securities and Exchange Commission 100 F Street, N.E. Washington, D.C. 20549 Dear Chairman Clayton, I am writing to urge you not to revise the shareholder proxy voting process under SEC Rule 14a-8. This rule process has had a strong and positive effect by highlighting ineffective corporate governance, enhancing transparency, and promoting corporate actions on a range of environmental, social and governance issues that promote economic growth and job creation over the long term while increasing long term shareholder value. The current shareholder proposal process is effective, efficient and beneficial to both shareholders and the long-term well-being of the companies they hold – there is no need to revise the rules governing the proxy process. For decades, the shareholder proposal process has served as a cost effective way to build long-term value while reducing the potential for harm and mismanagement. Shareholder resolutions have enhanced shareholder value by promoting such positive gains as: •Board diversity •Auditor independence •Annual election of all directors •The ability for shareowners to nominate candidates to serve on boards •The need to manage supply chain risks •The need to manage climate risk, as well as other environmental risks •Workplace diversity and non-discrimination Furthermore, the current ownership threshold of at least $2,000 worth of a company’s shares allows a diversity of voices to be heard, including smaller investors. The requirement of ownership for at least one year prior to filing a proposal ensures that investors cannot simply buy shares before the filing deadline and sponsor a resolution. Raising the ownership threshold threatens to exclude smaller investors, which will categorically diminish the equality of the system. Shareholders big and small can make and have made valuable contributions to the companies that they own – and this should remain as is. The argument has been made that shareholder resolutions are a burden on the markets. However, only approximately 200 social and environmental resolutions came to a vote this year – hardly a burden. The vast majority of companies never even receive a shareholder resolution. Rather, most resolutions prompt productive dialogue and improved understanding between shareholders and management, leading to significant policy changes that can transform businesses. Resolutions with oil and gas majors have pushed companies to report on the risks of climate change and build business plans in alignment with the 2° C warming threshold established in the Paris Climate Agreement. Resolutions highlighting human rights risks in corporate operations and global supply chains have brought human trafficking and forced labor to the forefront. As a result of shareholder pressure, Fortune 500 companies like Coca Cola, HP, Ford and Gap now have human rights policies and supplier codes of conduct that help them uncover and eradicate these violations from their supply chains – along with the legal, reputational and financial risks they represent. If the SEC submits to changing Rule 14a-8, proposals like these could be excluded, inhibiting important contributions to corporate governance that have proven beneficial to the long-term health and performance of companies, and the well-being of people and the environment. Critics of the shareholder resolution process have a clear political agenda – to limit the ability of shareholders to engage with the companies that they own, and to cripple the proxy process that has been in place for over fifty years. I urge you to uphold the rights of shareholders and do not make changes to Rule 14a-8. Thank you.