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SEC-NYU Dialogue on Securities Market Regulation Concluding Remarks

New York, N.Y.

Jan. 19, 2018

Thank you, Michele [Anderson], for that kind introduction.

Before I go further, I must state that the views I express today are my own, and not necessarily those of my fellow Commissioners or the SEC staff.

Good afternoon everyone. Thank you all for coming and contributing to a very lively discussion about how today’s companies interact with their shareholders. In particular, I want to thank our host, the NYU Salomon Center for the Study of Financial Institutions, because so much work goes into hosting events like today’s.

I also would like to thank each of the panelists, Jen Juergens and the rest of the SEC staff in the Division of Economic and Risk Analysis, and the Division of Corporation Finance.

As you know, today’s discussion is the fourth in a series of dialogues sponsored by NYU and the SEC focused on an exchange of ideas on today’s securities laws and whether our regulatory framework is effective in today’s environment. This past year, our conversations have covered a range of important topics—from crowdfunding and IPOs, to exchange-traded products, and now, shareholder engagement.

In many ways, the relationship between corporations and their shareholders is the bedrock upon which our capital markets stand. Today’s dialogue implicates the past, present, and future of this relationship. And, importantly, it requires us to think about one of the strengths of the American corporate form—shareholder involvement.

I’d like to start thinking about a vision of the future by briefly touching upon the past. From the late-1700s to the mid-1800s, companies flourished in the United States.[1] During this time, American companies typically operated within a single state, city, or town.[2] As a result, the shareholders of a company often resided close to the company and were able to monitor the company’s business affairs more directly. Shareholders’ meetings were in-person and, on average, more frequent, with management and shareholders engaging to solve problems to move the company forward.[3]

Shareholder engagement was robust and focused on a company’s long-term growth and its shareholders’ long-term prosperity. This makes sense, because, central to the American corporate form is the interaction between the corporate entity—represented by its board and management—and its owners—represented by its shareholders. In other words: shareholder engagement. Like our evolving democracy, part of the strength of the American corporate form is its built-in checks and balances.

A lot has happened since the 1700s. Companies have become more global and so have their shareholders. Pension funds, mutual funds, money managers, insurance companies, investment banks, hedge funds, and other institutional shareholders now make up a substantial majority of most companies’ shareholders.[4] And, now, it is common for a company’s board and management to run its operations with little input from all of its shareholders.

In the 1700s, meetings had to be in person. There was no technology to allow shareholders in disparate locations to communicate. Over 25 years ago, however, a young software engineer proposed a “universal linked information system . . . to allow a pool of information to develop which could grow and evolve with the organization. . . .” This spawned the “world wide web,” which, as we all know, has radically transformed how we communicate as a society.

Given these changes, how do we harness the strengths of the American corporate form and bring them forward into the Digital Age? How can we modernize shareholder engagement and promote effective shareholder participation?

As you know, the SEC has issued rules that help shape the means by which a company communicates with its shareholders[5] and, importantly, that provide a means by which shareholders can engage with the company—both its management and its board.[6] However, many companies are now using technology to improve engagement with their shareholders. For example, some are offering virtual or live webcasts of their shareholder meetings or are using social media and mobile technology. Others are using data analytics to get a “three-dimensional picture” of their shareholders.[7] They are also sifting through historical SEC filings to determine which communications with shareholders are most effective.[8]

While a step in the right direction, we must also be attentive to the effects these technological developments have on retail shareholder engagement.[9] Are companies using these technologies only in connection with their institutional shareholders? Are companies recognizing the unique circumstances of the retail shareholder-company relationship and how they can benefit from them? For example, it has been reported that approximately 80% of Americans had a social media profile in 2016.[10] To be sure, we are inundated with social media platforms, which companies use to engage consumers and employees, and to market their goods or services. One could imagine, then, an increase in retail shareholder engagement as a result of being allowed to vote through a mobile phone application or perhaps engage in a discussion with management through social media. Like purchasing an item on the Internet or using Estonia’s e-voting system—which has allowed online voting for national elections for more than a decade[11]—maybe a retail shareholder should be able to click a button to vote for a particular director? Or maybe, following Delaware’s lead, companies can use distributed ledger technology as a means to enhance shareholder engagement more broadly.[12]

There are probably other tools, and we should continue to explore them, because providing shareholders a voice is important. Indeed, as I mentioned earlier, it is foundational to the American corporate form. Part of the success of our capital markets is the trust that investors from all over the world have in our system. A key driver of that trust is shareholder engagement.

Thus, shareholder engagement is not an abstract benefit for a company. Shareholder engagement is a two-way information highway. In one direction, it provides a company with the ability to share its perspective and policies on a variety of matters.[13] It also allows a company to develop goodwill with its shareholders.[14] In the other direction, shareholders can provide input on matters that can positively affect a company’s bottom line—from board diversity[15] to an interest in long-term company growth. Accordingly, this engagement benefits both the company and the shareholders.

As we move forward, then, we have to ask ourselves whether in recent years the underlying strengths of the American corporate form are fully being utilized. Is our foundation sound? Are some companies engaging with their shareholders just as a means to “check-the-proverbial-corporate-governance-box”?[16] Do some shareholders have a bigger voice than others? Do some shareholders lack the power to effect change in a company all together?[17] Are companies engaging with shareholders simply as a means of resisting so-called activist investors,[18] which in itself may be perpetuating a form of short-termism? In the end, are today’s shareholders simply the extras in the corporate movie—they have a role, but no meaningful speaking part? Are we upholding the principles that have led to the incredible success of the American corporation?

Shareholder engagement is the base on which the American form of corporate governance stands. When companies engage with all of their shareholders, a productive dialogue can result—much like the one we experienced today. Such engagement provides diversity of thought, which provides management with invaluable insight into how best to position the company for long-term growth[19] and, in turn, shareholder value. Such diversity is invaluable to the long-term growth and success of a company.

* * * * *

In closing, today’s dialogue has helped elicit some useful insights into the current state of shareholder engagement with companies, and has afforded us the ability to continue the discussion as we move forward. We must continue to be mindful of the power and strength of shareholder engagement, and how it can continue to be one of the strengths of the American corporate form.

Thank you, and I look forward to continuing our dialogue.

[1] See Ralph Gomory & Richard Sylla, The American Corporation, 142 Dædalus 102 (2013), available at

[2] Id.

[3] Id. See also Adolf A. Berle & Gardiner C. Means, The Modern Corporation and Private Property (Routledge 2d Ed. (Feb. 1991)).

[4] See Jill E. Fisch, Standing Voting Instructions: Empowering the Excluded Retail Investor, 102 Minn. L. Rev. 11 (2017), available at

[5] See, e.g., Regulation 14A [17 CFR 240.14a-1 – 17 CFR 240.14b-2].

[6] See Rule 14a-8 [17 CFR 240.14a-8].

[7] See, e.g., Sherri McLoughlin, “Using Technology for Better Shareholder Engagement,” Corporate Secretary (Nov. 10, 2017), available at

[8] Id.

[9] See, e.g., Lisa Fontenot & Linda Dan, “The Pros and Cons of Virtual-Only Shareholder Meetings,” Law360 (Nov. 29, 2016) (discussing, for example, concerns relating to companies selecting questions ahead of the meeting).

[10] See, e.g., Shannon Greenwood, Andrew Perrin & Maeve Duggan, “Social Media Update 2016,” Pew Research Center (Nov. 11, 2016), available at

[11] See, e.g., Kalev Leetaru, “How Estonia’s E-Voting System Could Be The Future,” Forbes (Jun. 7, 2017), available at

[12] See, e.g., Jeff John Roberts, “Companies Can Put Shareholders on a Blockchain Starting Today,” Fortune (Aug. 1, 2017), available at

[13] See, e.g., Lisa M. Fairfax, Mandating Board-Shareholder Engagement?, 2013 U. Ill. L. Rev. 821 (2013), available at (discussing the importance of shareholder engagement with respect to educating shareholders and generating support for corporate policies, such as corporate pay packages).

[14] Id.

[15] Shareholders have increasingly pursued gender diversity on boards in light of research that has shown that companies with strong female leadership generated higher returns on equity compared to those without. See, e.g., SSGA’s Guidance on Enhancing GenderDiversity on Boards (Mar. 7, 2017), available at; Investment Stewardship Report: Americas Q2 2017 (Jun. 30, 2017), available at; Emily Chasan, “BlackRock Puts Its Votes Behind Proposals to Get Women on Boards,” Bloomberg (Jul. 13, 2017), available at; Renee Adams & Daniel Ferreirra, Women in the Boardroom and their Impact on Governance and Performance, 94 J. of Fin. Econ. 291 (2009), available at; Linda-Eling Lee et al., Women on Boards: Global Trends in Gender Diversity on Corporate Boards, MSCI ESG Research Inc. (Nov. 2015), available at

[16] See, e.g., Christopher P. Skroupa, “The Era of Shareholder Engagement—the Best or Worst of Times?,” Forbes (Sept. 6, 2016), available at

[17] See John C. Bogle, “The Modern Corporation and the Public Interest,” Speech Before the Public Company Accounting Oversight Board (Dec. 7, 2017), available at; Snap Inc., Prospectus dated March 1, 2017, available at

[18] See, e.g., Tim Loh & Jack Kaskey, “DuPont Retail Investors Prove Decisive in Defeat of Trian,” Bloomberg (May 13, 2015), available at

[19] See, e.g., Alison Noon, “Exxon Agrees to Disclose Climate Change Risks to Investors,” Law 360 (Dec.12, 2017), available at

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