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House Republicans rejected a Democratic attempt to defend shareholder access to the corporate ballot.
All but the very biggest investors would be blocked from putting resolutions up for a vote of their peers at companies’ annual meetings under Republican legislation that the House Financial Services Committee approved May 4.
Republicans turned back an amendment from New York Democrat Carolyn Maloney that would have stripped the shareholder access provision from the bill. The vote was 33-26 along strict party lines.
Institutional investors with trillions of dollars in assets under management have already made their opposition known to the bill’s sponsor, committee chairman Jeb Hensarling (R-Texas), and his Democratic counterpart, Rep. Maxine Waters (D-Calif.).
Hensarling’s Financial Choice Act (H.R. 10) would only let shareholders owning at least 1 percent of a company’s stock for a minimum of three years submit a proposal. At big companies, that could mean billions of dollars’ worth of stock—a bar so high that not even the largest pension funds in the U.S. could meet it.
Shareholders with as little as $2,000 in shares for a year or more can submit proposals now.
The higher threshold is meant to make sure “proposals are actually based upon materiality,” Hensarling told reporters April 27. “I fear that too many of these proposals from those who have minuscule portions of stock are frankly hurting the financial interest of others who have taken more substantial positions in these particular public companies.”
House Republicans want to move quickly on Hensarling’s legislation to pare back the Dodd-Frank Act, but it’s unlikely to get past Senate Democrats in its current form.
Waters, who calls it “the Wrong Choice Act,” has heard concerns from one investor in her home state: the California State Teachers’ Retirement System, which is the nation’s second-largest pension fund. CalSTRS Chief Executive Officer Jack Ehnes said in an April 25 letter to Waters that dramatically changing the shareholder proposal process, as the bill intends, would have a “chilling” effect on company-shareholder relations.
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