Shareholders call on Congress to drop SEC ESG changes

30 April, 2021

A coalition of almost 200 US shareholder groups has launched a campaign to overthrow new SEC rules that they claim are an “an attack on corporate democracy”. 

The campaign targets rule changes announced by the Securities and Exchange Commission in 2020. The proposed rules place restrictions on shareholders’ ability to table proposals at company meetings.  

The activist coalition has written to every member of the US House of Representatives and the Senate calling on them to use their powers under the Congressional Review Act to strike out the rule changes. 

Signatories to the letter include the Interfaith Center on Corporate Responsibility (ICCR), the Shareholder Rights Group, and AFL-CIO, the US’s largest union. Numerous investment firms also joined the campaign. 

The SEC's controversial changes would increase the thresholds for Shareholders to submit proposals, requiring them to have held a larger amount of shares for a longer length of time. Resubmitting proposals and aggregating holdings to meet thresholds will also be disallowed under the proposed changes.

Josh Zimmer, CEO of the ICCR, said: “If not overturned, these rules will profoundly restrain shareholder efforts on issues that are of pressing importance to us and to our broader economy. Congress has an opportunity to undo this damage and restore an important component of shareholder oversight and corporate accountability.” 

Opponents of the rule changes have warned that the plans could undermine proposals related to environmental, social and governance questions, just as shareholders were pressing most strongly on these issues.  

The new rules have provoked disagreement even within the SEC. In September last year Commissioner Allison Herren Lee announced her dissent from the SEC decision, stating: “These actions collectively put a thumb on the scale for management in the balance of power between companies and their owners.”