The Shareholders Are Coming ... The Shareholders Are Coming

They are getting ready to storm the barricades.

Or maybe they are riding to the rescue.

Well, choose your cliche. What's clear is that some shareholder-advocacy groups, including the Social Investment Forum and the Interfaith Center on Corporate Responsibility, are campaigning to head off what they rightly see as a great injustice in the offing.

And, lickety-split, they’ve patched together a website, SaveShareholderRights, to rally the troops.

The brouhaha involves a July decision by the Securities and Exchange Commission to propose changes to proxy-access rules and the nonbinding resolution process that the groups state would be a weighty drag on shareholders’ rights and responsible corporate stewardship.

And, just so we can be clear about things, the SEC has made its intentions very murky on one of these issues, according to a recent Wall Street Journal article [password required].

That’s because swing-voter SEC chairman Christopher Cox reportedly sided with commission GOPers to propose barring the inclusion in proxy materials of shareholder resolutions that deal with changing bylaws related to director elections.

And, conversely, Cox also backed a proposed amendment by commission Democrats that calls for such shareholder resolutions to be included in proxy materials if shareholders have owned at least 5% of a company’s stock for at least a year.

Talk about some fence-straddling.

So, in an era when everything is supposedly tilting toward transparency in the corporate boardrooms of many public companies, with the volume of sustainability reports ever-growing and piling up, the SEC’s contemplated amendments would either endorse the SEC’s long-held stance of barring shareholder election-change resolutions outright, or limit their drafting to all but the most powerful shareholders.

And, regarding that 5%-ownership provision, when you are talking about mega, multinational corporations, that equity-stake requirement ain’t exactly chump change.

Five percent sets the bar pretty high.

But, shouldn’t the push to make corporations more transparent about their financial and sustainable operations come accompanied with a dose of a little democracy in the boardroom? But, that democratic impulse apparently would be given short shrift by the SEC’s proposed amendments.

Another SEC proposal, according to SIF, would eliminate nonbinding shareholder resolutions – or at least pave the way for their elimination. These resolutions, which often lead to fruitful negotiations between boards and shareholders, have pressured corporations to clean up their smokestack emissions, pull operations of South Africa under apartheid, trim excessive executive compensation or eliminate discriminatory hiring or promotion practices.

The SEC proposes to curb advisory resolutions on such issues by instead enabling corporations and shareholders to bridge their differences in “electronic shareholder forums” of varying shapes.

The SEC’s vision is that going webby on management-shareholder dialogue brings such discussions into the 21st century, and the forums would reduce companies’ compliance costs. Incidentally, under this scenario, companies wouldn’t be held liable for shareholders’ statements in these online discussions, according to the SEC.

But, some corporate boards, entrenched in their ways, might see the forums as a buffer, reducing their burden of having to bother with those pesky, non-binding shareholder resolutions.

The SEC comment period about the proposals runs through Oct. 2.

The CRO Blog’s “comment period” about the issue starts now.

What do you think?