Abstract
Social policy’s role in shareholder proposals is the focal point of this Article. The SEC sets standards for the social policy issues allowed to be submitted to a shareholder vote but will not define social policy or describe the agency’s methods. The SEC determines whether a proposal appears on a range of environmental and social matters, such as climate change, human rights, and corporate political activities. Generally, shareholder proposals related to a company’s ordinary business operations are matters reserved for the board of directors. However, when these same matters trigger SEC-determined social policy questions, they must often be put to a shareholder vote. Legally non-binding SEC no-action letters govern most decisions about whether a shareholder proposal appears; there is little social policy case law and a scarcity of formal administrative rulings. Index funds and proxy advisors amplify the social policy drama now playing out. Index funds seeking to address “systemic” risk and proxy advisors that sway votes without capital at risk heighten the consequences. By analyzing how it applies in actual cases and current-day hypotheticals, this Article concludes that social policy places the SEC in untenable situations, interferes with the proper functioning of boards, frustrates disclosure regimes, and affords undue power to activists with singular and idiosyncratic goals. These harms, sometimes justified in the name of shareholder democracy, outweigh any benefits to social policy as an instrument of shareholder rights. After exploring the options to repair the problems, this Article recommends the SEC act through formal rulemaking to eliminate social policy as a consideration in shareholder proposals that involve a company’s ordinary business operations.
Recommended Citation
Creighton R. Meland Jr.,
Shareholder Proposals and Social Policy,
48
S. Ill. U. L.J.
215
(2023).
Available at:
https://opensiuc.lib.siu.edu/siulj/vol48/iss2/4