Tuesday, January 9, 2018

Back to Reality and (Mostly) Staying the Course on Shareholder Proposals

The new semester is upon us, and AALS (as it tends to) ran right into the new semester.  Joan Heminway provided a nice overview of some of her activities, including her recognition as an outstanding mentor by the Section on Business Associations, and it was a pleasure to see her recognized for her tireless and consistent efforts to make all of us better.  Congratulations, Joan, and thank you! 

I, too, had a busy conference, with most of it condensed to Friday and Saturday. (As a side note, it was pretty great to run along the water in 55-65 degree weather. As much as I love New York and appreciate San Francisco and DC, I'd be quite content with AALS moving between San Diego and New Orleans.)  I spoke on a panel with my co-bloggers, as Joan noted, about shareholder proposals, and I spoke on a panel about the green economy and sustainability, which was also fun.  It's nice when I am able to spend some time with a focus on my two main areas of research. 

As to our panel on shareholder proposals, I thought I'd share a few of my thoughts.  First, as I have explained in the past, I am not anti-activist investor, even though I often think their proposals are wrong headed. I think shareholder (and hedge fund) activist can add value, even when they are wrong, as long as directors continue to exercise their judgment and lead the firm appropriately.   

Second, although I tend to have a bias for staying the course and leaving many laws and regulations alone, I am open to some changes for shareholder proposals. The value of the current system (especially one that has been in place for some time) is that everyone knows the rules, which means there is some level of efficiency for all the players.  

That said, the threshold for shareholder proposals has been in places since the 1950s.  The Financial Choice Act looks to move the proxy threshold from $2,000 and one-year holdings to a 1%/three-year hurdle.  That is a pretty big move. Updating the $2,000 threshold from 1960 would mean raising the threshold to around $16,000, so a move to what can be millions may be too much.  But $16,000 (basically updating for inflation), would make some sense to me, too.  Anyway, just a few simple thoughts to start the year. Hope your classes are starting well.  

https://lawprofessors.typepad.com/business_law/2018/01/back-to-reality-and-mostly-staying-the-course-on-shareholder-proposals.html

Corporations, Financial Markets, Joan Heminway, Joshua P. Fershee, Securities Regulation, Shareholders | Permalink

Comments

Thanks for the kind words, Josh. Truly appreciated.

For the record, I also am not against activist investor participation in corporate governance. But I hope that policy makers will look, as Chairman Clayton suggests in his call to revive Proxy Plumbing, at the whole voting process rather than just tinker with process points (like the ownership threshold for shareholder proposals). Having said that, I fear that if the SEC takes too long or does nothing, Congress will, in fact, act. And I am not confident in Congress's ability to get it right.

Posted by: joanheminway | Jan 11, 2018 7:16:40 PM

Great points, Joan. And thanks for the comments. I share your concerns.

Posted by: Joshua Fershee | Jan 12, 2018 3:34:30 PM

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