SEC Commissioner Mark T. Uyeda said the agency, companies and their shareholders should work to implement reforms for the shareholder-proposal process.
Specifically, the SEC could make better of use of private ordering to manage shareholder proposals; "exclude proposals on social policy issues that lack a material relationship with the company"; and make changes to how agency staff processes proposals, Mr. Uyeda said Wednesday at the Society for Corporate Governance 2023 National Conference.
The number of proposals that made it to a vote in 2023 increased by 40% from the 2021 season, Mr. Uyeda said, adding that the cost of processing a single proposal can cost a company up to $150,000.
In order to address this, Mr. Uyeda offered a number of recommendations, the first being to make greater use of private ordering. "For shareholder proposals, private ordering can offer potential benefits to companies and their shareholders," he said.
Private ordering offers certainty that procedures will not change whenever someone new takes over the SEC, allows company fiduciaries to establish requirements that best fit their shareholders' needs and enables companies to revise their procedures more quickly, he said.
In addition, Mr. Uyeda suggested that the SEC create a single standard for evaluating social policy issues in shareholder proposals, adding, "shareholder meetings were not intended under state corporate laws to be political battlegrounds or debating societies."
Ultimately, Mr. Uyeda recommended that proposals focused on social policy issues be excluded if not "materially related" to the company.
Finally, Mr. Uyeda suggested making changes to how agency staff processes shareholder proposals.
"The commission should reassess whether companies still need to send the shareholder proponent a copy of the opposition statement before filing the definitive proxy statement," he said.
In addition, Mr. Uyeda recommended that staff refrain from making determinations on whether an issue is a social policy issue, or whether a proposal violates the law outside federal securities law.
"By declining to provide a view on social policy issues and violations of law other than the federal securities laws, the staff would have more time and resources to prepare no-action letters responding to other bases for exclusion," he said.