Jan. 28, 2020
Dear Ms. Countryman, I write as a long term, individual investor. My portfolio has been entrusted to an investment management firm which invests the accounts using ESG factors in their stock selection. My funds are invested in individual stocks rather than mutual funds. The investment management firm also votes proxies and actively engages companies for me and other clients. While I have never filed a shareholder resolution, I have a very real interest in the proxy process and the impact it has had over the last 50 plus years. I write to oppose the rules proposed by the Securities and Exchange Commission (SEC) on November 5th, 2019. If passed these rules would severely limit the rights of shareholders to engage with corporations using the shareholder resolution process. As a long-term investor, I support the stockholders who engage with companies on critical environmental, social, and governance (ESG) issues. For decades, the shareholder proposal process has been a valuable tool allowing corporate management and boards to gain a better understanding of shareholder priorities and concerns. The proposed rule changes will make companies far less accountable to shareholders. For example, the proposed increase in ownership thresholds will make it difficult for smaller investors to voice important concerns with companies they own. The current ownership threshold of $2,000 ensures that a diversity of voices is heard, not just the biggest players. According to data compiled by the Sustainable Investments Institute, 187 resolutions on social and environmental topics came to a vote at US companies in the spring of 2019. Many of these were filed by investors with relatively small stakes consistent with the existing filing thresholds. These proposals received an average of 25.6 % support in 2019, a marked increase from 21.4% in 2017, demonstrating that proposals of interest can and do originate with smaller individual and institutional investors.[1] The proposed increase in resubmission thresholds threatens to unnecessarily exclude important proposals that gain traction over time and will ultimately stifle key reforms. There are many examples throughout the years of resolutions that initially received low votes, but went on to receive significant support or have led to productive engagement. Historically, materiality of issues mature among a broader section of shareholders as they come to appreciate the serious risks to companies. The issue of declassified boards is just one example – in 1987 proposals on this issue received under 10% support; in 2012 this proposal topic received 81%, support and is now considered to be best practice. Other examples include resolutions with oil and gas companies on the risks of climate change that often received below 5% of shareholder support when first introduced beginning in 1998, but which now receive substantial, and even majority shareholder votes, and have been adapted by numerous companies. Clearly these and other votes on critical matters signify that investors appreciate the value of the issues being raised in resolutions. The current 14a-8 rule has worked well for decades, and there is no need to revise it. Trade associations like the Business Roundtable, the U.S. Chamber of Commerce, and the National Association of Manufacturers have lobbied rigorously for the proposed changes by exaggerating the cost of the process to companies, and by misleadingly painting shareholders raising ESG issues as “activists” imposing a “social agenda” who are “uninterested in shareholder value.” This misinformation feeds a political agenda by the trade associations to limit the ability of shareholders to engage with the companies that they own. Many companies understand that this engagement enables them to mitigate reputational, legal, and financial risks, and build value. The filing of shareholders resolutions by investors big and small is a crucial part of the engagement process. I strongly urge the SEC to reconsider the proposed rule changes. These changes will make companies far less accountable to shareholders, setting a dangerous precedent at a time when corporations need greater oversight, not less. Sincerely, Douglas and Judith S. Weinstock [redacted]