The Securities and Exchange Commission should reform the proxy-voting process by making it more difficult for certain shareholder proposals to make it onto company proxy ballots, according to an April 23 report from the Business Roundtable.
“The current state of the proxy process is unsustainable,” the advocacy group comprising more than 200 CEOs said in its report. “Companies are being forced to divert significant resources and attention toward responding to a flood of ideology-driven shareholder proposals — resources that would be better spent driving long-term value creation. These escalating costs ultimately fall on shareholders, yet there is little evidence that such proposals yield meaningful economic benefits.”
The Business Roundtable asserts that shareholder proposals in recent years have increasingly been used as a tool to advance environmental, social and political agendas. The group cited data showing that from 2020 to 2024, the number of environmental and social proposals rose by 59%.
In its paper, the Business Roundtable called on Congress and the SEC to restore Securities Exchange Act Rule 14a-8, which concerns shareholder proposals, to its “original intent” by precluding shareholder proposals that advance broad ideological agendas.
“The shareholder proposal process was intended to foster constructive engagement between investors and companies in support of long-term value,” said Kristen Silverberg, Business Roundtable president and chief operating officer, in a statement. “Today, it too often serves as a platform for ideological agendas unrelated to the company’s long-term performance.”
Investor groups feel differently and say shareholder proposals enable investors to safeguard their portfolios and protect the American public by holding corporate boards and management accountable for mismanagement and egregious conduct.
If Congress does not change the law, the SEC should amend Rule 14a-8 to add an exclusion for proposals relating to environmental, social and political issues, the Business Roundtable said.
The agency should also raise shareholder proposal submission and resubmission thresholds, the group added.
The Trump administration has already taken steps to make the proxy-voting process more amenable to businesses. In February, the SEC issued Staff Legal Bulletin 14M, or SLB 14M, making it easier for public companies to get the green light to exclude shareholder proposals on company proxy statements.
If a company thinks a proposal is out of bounds or has already been addressed, it can file a no-action letter with the SEC, requesting permission not to include the proposal in its proxy statement.
In SLB 14M, the SEC said that when determining whether it should grant a company no-action relief, the agency will analyze whether a shareholder proposal affects at least 5% of the company’s total assets, net earnings and gross sales.
Under SLB 14M, the SEC also reinstated three legal bulletins issued during the first Trump administration with language that made it more likely for the SEC to rule in favor of companies seeking no-action relief. With that move, the bulletin correspondingly rescinded a November 2021 bulletin, SLB 14L, promulgated under the Biden administration that made it easier for shareholder proposals to make it onto a company’s proxy ballot.
The Business Roundtable supports SLB 14M but says more work is needed.
Moreover, the group argued that proxy-advisory firms have too much influence over the voting process and urged the SEC to prohibit “robo-voting” — the practice of mechanically voting in line with proxy-adviser recommendations — and require vote recommendations to be supported by economic analysis and to address conflicts of interest.
