The House Financial Services Committee wrapped up its “ESG month” hearings that attempted to deter companies from adopting ESG practices. Recently, Cooley published a memo on ESG month developments – specifically attempts to target reform in the shareholder proposal process, which is frequently used to advance ESG causes.
The committee put forward six bills aimed at reforming the shareholder proposal process in order to make it harder for investors to bring votes on key ESG issues. The memo summarizes them as follows:
“At least six of those bills related to the shareholder proposal process, including one to authorize the exclusion of shareholder proposals from proxy materials if the subject matter is environmental, social or political; one to clarify that an issuer may exclude a shareholder proposal under Rule 14a-8(i) without regard to whether it relates to a significant social policy issue; and one to amend the Exchange Act to prohibit the SEC from compelling the inclusion of shareholder proposals or any discussion related to a shareholder proposal in proxy materials altogether. (Of course, it’s unlikely that any of these bills would be viable in the Senate or signed by the President.)”
While these bills are unlikely to have any practical impact in the current political environment, they offer insight into the strategies the anti-ESG movement plans to pursue if the political tides change. The memo also notes that SEC commissioner Mark Uyeda appears in sync with the House Committee’s thinking on shareholder proposal reform. Depending on the outcome of the 2024 elections, political forces may pose viable threats to the current shareholder proposal process.
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