SEC Adopts Amendments to Shareholder Proposal Rule

October 16, 2020

On September 23, 2020, the SEC adopted amendments to Exchange Act Rule 14a-8, the rule that governs the process for shareholder proposals to be included in a company’s proxy statement. The amendments were proposed on November 5, 2019, and were adopted substantially as proposed with the exception of the so-called Momentum Requirement (discussed below), which was not adopted.

According to the SEC’s press release, the amendments “are intended to help ensure that the ability to have a proposal included alongside management’s in a company’s proxy materials—and thus to draw on company and shareholder resources and to command the time and attention of the company and other shareholders—is appropriately calibrated and takes into consideration the interests of not only the shareholder who submits a proposal but also the company and other shareholders who bear the costs associated with the inclusion of such proposals in the company’s proxy statement.”

As proposed, the amendments would have permitted exclusion of a proposal that had been previously voted on three or more times in the last five years, notwithstanding having received at least 25 percent of the votes cast on its most recent submission, if the proposal received less than 50 percent of the votes cast and experienced a decline in shareholder support of 10 percent or more compared to the immediately preceding vote (the “Momentum Requirement”). The SEC did not adopt the Momentum Requirement.

For a more detailed discussion of the amendments as originally proposed, see “SEC Proposes Amendments to Shareholder Proposal Rule.”

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