Dec. 6, 2018

Lawmakers Should Expand, Not Shrink, Shareholder Rights

Statement of Lisa Gilbert, Vice President of Legislative Affairs for Public Citizen

Note: Today, the U.S. Senate Committee on Banking, Housing and Urban Affairs is holding a hearing on the proxy process following a recent roundtable at the U.S. Securities and Exchange Commission on the same topic.

Our expectations for corporate democracy are the same as those for traditional democracy: It must be responsive to all voices, hold those in charge accountable and allow everyone with a stake to participate.

When individual investors demand accountability or raise an issue with their companies, mangers should listen and respond. When an issue rises to prominence and investors across the corporate world demand the same change, lawmakers need to step in and respond with federal policy.

This is the mandate of shareholder democracy and often the mechanism for change. For example, numerous shareholders continue to call for corporate political spending disclosure through the resolution process, and their cry for action led to a wildly popular U.S. Securities and Exchange Commission petition for action on this topic. Similarly, the long-term investor ask for the ability to vote on executive pay packages was made policy in the Dodd-Frank Act.

As the Senate debates the proxy process, senators should be wary of attempts to focus excessively on proxy advisory firms, the entities charged with making independent recommendations to shareholders about how to vote in corporate elections. This is a distraction being pushed by narrow corporate interests who oppose shareholder democracy and the ongoing asks from investors for expanded rights and disclosures. Instead, the Senate should use this hearing to focus on making shareholder democracy truly responsive to retail investors.

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