January 25, 2020
Dear Commissioners,
In 2016 I graduated from the Wharton School at the University of Pennsylvania with an MBA, having greatly enhanced my knowledge of the corporate sector and how it can thrive. I focused my MBA on Environmental Risk Management, building on the business elements of sustainability topics I first studied at Rice University, where I double-majored in Environmental Engineering and Policy Studies. At Wharton, I grappled with how corporations are faced with the challenge of providing short-term returns to shareholders as well as long-term value for long-term investors. Since graduating, I joined shareholder advocacy group As You Sow as our Energy Program Manager. I have seen first hand how productive dialogues with companies can lead to better risk management and increased awareness of Environmental, Social, Governance (ESG) issues as they emerge, evolve, and grow in their ability to materially impact shareholder value, especially for systemic risks such as those presented by the climate crisis.
The changes proposed by the SEC are alarming and unjustified. The value of a shareholder proposal is not tied to owning a higher dollar value of shares, to its ability to garner high votes in early years, nor to whether an authorized representative is leading on more than one engagement at a time. Large and small shareholders and their representatives have and should retain the right to put forward proposals that raise new, lesser-known concerns. They have done so for years and the process has worked and led to productive, win-win changes for corporations, shareholders, and other stakeholders.
Worth emphasizing is the proposed rule's improper restriction on the right of shareholders to be represented by agents. Given the complicated process of filing a shareholder proposal, it is reasonable for shareholders to utilize external experts to represent them as they see fit. This is a standard, reasonable practice. As You Sow represents some shareholders that lack the capacity to actively participate in all engagements. These shareholders nevertheless deserve to have their concerns brought forward by their authorized agents. As You Sow, like other firms authorized to represent individuals or agencies, has the necessary expertise to be able to do so, and to do so for more than one shareholder at a time. Companies tell us they appreciate our feedback. Shareholders tell us they appreciate our ability to raise their concerns. The SEC has no right to prevent shareholders from authorizing external representation.
As noted by large institutions like BlackRock, the role of corporations is evolving and systemic risks like climate change require thoughtful dialogue between investors and corporations. Counterproductively, the SEC is now proposing major restrictions on such dialogues. Furthermore, the proposed restrictions are arbitrary and lack any justification based in data. The SEC has yet to provide fact-based analysis as to how these specific rules were determined or what their impacts (negative or positive) will be. This significant oversight is unacceptable and threatens shareholder democracy. I would like to see the SEC provide such analysis, including, for instance, analysis of data sets regarding the dollar value behind the lead filer of a resolution compared to the dollar value behind the vote results of such proposals, especially where those vote results were well above set thresholds. I would also like to see an analysis of cases where companies decided to take action to address shareholder concerns raised in proposals that received relatively low votes when first put forward.
I personally am dedicating my life to pursue practical approaches to maintain a stable climate, and therefore planet, for generations to come. I believe corporations have a critical role to play in solving the increasingly urgent climate crisis and that shareholder engagement, including the filing of proposals, is an effective way to ensure corporations are appropriately managing that responsibility.
I urge the SEC to withdraw the proposed rules and maintain the integrity of the shareholder proposal process, which is a vital part of the SEC's mission to protect investors.
Sincerely,
Lila Holzman