SEC’s Short-Sighted Shareholder Proposal Move Could Lock In Left’s Corporate Gains

Washington, D.C. - The Securities and Exchange Commission's decision to abandon federal oversight of shareholder proposals is a short-sighted move that could ultimately strengthen the hand of corporate management and leave free-enterprise investors with fewer avenues to challenge the growing influence of left-wing shareholder activists, say shareholder activists with the National Center for Public Policy Research's Free Enterprise Project (FEP).

The SEC voted Wednesday to propose rescinding Rule 14a-8, which governs when public companies must include qualifying shareholder proposals in their proxy materials, shifting the issue largely to state corporate law.

"The allegedly 'free market' commissioners at the SEC have proposed to lock in left-wing shareholder activist gains and leave pro-free enterprise shareholder activists to the tender mercies of corporate management-loving state laws," said FEP Executive Director Steve Milloy.

In a commentary published last month in RealClearMarkets, Milloy explained what's wrong with the SEC's proposal:

For decades, left-wing activist shareholders have used shareholder proposals under SEC rules to hijack the resources and influence of publicly traded corporations….

Other conservative nonprofit groups, including the Free Enterprise Project I am with now, hung on. They continued using shareholder proposals to press management on its caving to left-wing activist shareholders.

The battle for the heart and soul of corporate America continues today through shareholder proposals and annual meetings. Ironically, it is now threatened by the SEC's free-market commissioners. They take a dim view of all activist shareholders….

The left-wing activist shareholders are perfectly okay with this. They have already captured control of corporate managements and large institutional investors.

After this latest move by the SEC, free-enterprise shareholders could find themselves fighting with one hand tied behind their backs. By shifting shareholder-proposal decisions to state law and corporate governing documents, the SEC risks eliminating a federal avenue activists have relied upon to bring corporate governance issues before fellow investors.

"The Trump administration has improved upon the famous adage that capitalists will sell communists the rope by which the latter would hang the former. Now the capitalists seem to be just giving the rope away," Milloy said.