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The 2021 proxy season has shined a new spotlight on Washington, DC, as engaged shareholders turn their attention to a joint resolution from Congress. The resolution aims to rescind amendments enacted by the US Securities and Exchange Commission (SEC) in late 2020 that critics argue could curtail the shareholder proposal process.

Under the Congressional Review Act, Congress may vote to formally disapprove of the SEC amendments in a move that would leave the amendments with no force or effect. If the joint resolution fails to pass, the rules will take effect at year’s end.

“Last year’s changes to the SEC rule on shareholder proposals made it much harder for working families and investors to hold corporate management accountable,” said joint resolution sponsor Sen. Sherrod Brown. “Congress must repeal the rule. We also need to find ways to increase shareholder participation and to make executives more accountable.”

Proxy Season Invites an Air of Uncertainty

The amendments to SEC rule 14a-8 have been hotly debated since their introduction in November 2019. They include:

  • Increased stock ownership requirements for those submitting proposals
  • Restrictions on the capacity of shareholder representatives and their activities
  • Prescribed time frames for discussing proposals
  • Elevated eligibility levels for resubmitting proposals in the future

In announcing the amendments, the SEC said it was modernizing the proposal process for shareholder engagement, while making it more cost effective for corporations.

“The final rules represent the capstone in a series of policies that will dial back shareholder oversight of management at the companies they own,” opposing SEC Commissioner and acting chair Allison Lee wrote in response to the passing of the amendments. “These actions collectively put a thumb on the scale for management in the balance of power between companies and their owners.”

Nonetheless, efforts from those working against Brown’s Congressional Review Act maneuver, such as the US Chamber of Commerce and the National Association of Manufacturers, could keep the amendments in place. As it stands, the SEC’s revised rule will go into effect on January 1, 2022. Any proposal submitted for an annual or special meeting on or after that date would be held to the new requirements.

Certain themes that had been gaining steam now appear to be off the table this proxy season.

Climate Matters Lead This Year’s Crop of Proposals

According to As You Sow’s 2021 Proxy Preview, this year’s activity totaled about 435 resolutions despite the possibility of future restrictions. While on par with recent years, it still fell short of the nearly 500 filed in 2017. Ninety-one of this year’s proposals relate to the environment, including 66 that address climate change.

Long a target of responsible investors, environmental resolutions have increased in breadth and depth and are no longer limited to demands for disclosure of issues. Such proposals have moved beyond traditional targets in the energy and materials sectors, according to Glass, Lewis & Co.

For one, massive money manager BlackRock stands ready to “support shareholder proposals that ask companies to disclose climate plans” as part of its broader push for sharing strategies to address climate change. In its 2021 Proxy Season Preview, Alliance Advisors reports that BlackRock voted in favor of 89% of shareholders’ environmental resolutions in the second half of 2020 alone.

Alliance Advisors also noted that proposals urging carbon-heavy firms to drive lobbying efforts around Paris Agreement goals advanced at 12 companies. Four had been withdrawn at companies that agreed to engage with shareholders. UK-based hedge fund TCI, As You Sow, and individual advocate James McRitchie also advanced “say on climate” proposals at seven companies. The new approach opens a company up to annual shareholder feedback on its progress in climate change efforts.

Perhaps just as critically, certain themes that had been gaining steam now appear to be off the table this proxy season. According to Alliance Advisors, this includes pushing financial services firms to slash their exposure to fossil fuel assets. Five of the six largest US banks committed in 2020 to net-zero emissions in their books of business. The sixth announced this past March that it will assess its clients’ carbon footprints.

Attention Remains on Issues of Equality and Social Justice

In the wake of George Floyd’s death in May 2020, the US has seen heightened awareness of racial inequities as well as dissatisfaction with corporations that appeared to do little to back up public statements decrying systemic racism.

Against this backdrop, active shareholders forged ahead. As You Sow says that 18 new proposals specifically addressed racism, including eight calling for racial equity audits at financial services firms. As You Sow also reports a doubling of workplace diversity resolutions. According to Alliance Advisors, four times more proposals related to workplace equality were filed for 2021 than the previous year.

Moving beyond high-level disclosure, As You Sow, Nia Impact Capital, and the Nathan Cummings Foundation collaborated on a filing submitted at 22 companies that demands deeper reporting into the workings and impact of diversity and inclusion efforts. Overall, investment management firm Nuveen says proposals with an emphasis on such accountability can call out racial inequity in a company’s suppliers, customers, and the broader communities served.

According to As You Sow’s report, 16 proposals urging the public release of the annual EEO-1 form in order to detail corporate reporting of workforces’ gender and racial makeup have been withdrawn due to management cooperation. More than 10 remain; the report added that BlackRock and State Street Global Advisors have announced they will vote in support of measures that open up EEO-1 information.

Going forward, SEC efforts to limit shareholders’ voices could cause proxy season to look much different starting in 2022. Yet as large money managers such as BlackRock and State Street Global Advisors continue to see the value of shareholder engagement in furthering environmental, social, and governance goals, support continues for initiatives that seek accountability for corporations.


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