While many of the issues dominating shareholder proposal submissions are similar to those of recent years, albeit with some new wrinkles, the aftermath from the 35-day government shutdown has introduced uncertainty this proxy season.
"It's a mess because the SEC is six weeks behind schedule," said Heidi Welsh, founding executive director of the Washington-based Sustainable Investments Institute.
Staff members at the Securities and Exchange Commission's division of corporation finance were furloughed during the partial shutdown, which ended in late January. When a company files an objection on a given shareholder proposal, it's that SEC unit that determines if the proposal can be omitted.
As of mid-February, SEC staff allowed the omission of six proposals in the face of company challenges, fewer than the 27 omitted at the same point last year, according to a proxy preview report from non-profit shareholder advocacy group As You Sow, Proxy Impact and Sustainable Investment Institute. Companies had lodged objections to at least 52 more proposals that have yet to be decided as of March 25, according to information on the SEC's website.
Courteney Keatinge, New York-based senior director of environmental, social and governance research at proxy-voting advisory firm Glass, Lewis & Co., said the shutdown occurred during part of the busiest stretch for shareholder proposal objections, and the SEC staff is now working its way through a significant backlog.
Ms. Welsh, who co-authored the proxy preview report, said the SEC wasn't "responding to company challenges so it's hard to find out what those challenges were. The SEC is also late in issuing its responses because it wasn't there to write them."
An SEC spokeswoman declined comment when asked about the agency's response timeline.
If a company does not hear back from the SEC on a proposal it would like to omit from its proxy statement, it has a difficult decision to make: include the proposal even if it feels the proposal is out of bounds, or omit it and roll the dice that SEC won't penalize the company down the road. In the latter event, a company could be forced to reissue its proxy statement, postpone its annual meeting or be subject to shareholder lawsuits, Ms. Welsh said.
Ms. Keatinge said the companies that have contacted her have said they're going to play it safe and simply include the unresolved proposals. "There's a good chance that we may see more shareholder proposals (make it on the ballot) this year and we may see proposals that traditionally could have been excluded on certain grounds being included," she said.