US SEC chairman moves to give states power over shareholder resolutions

The U.S. Securities and Exchange Commission has announced plans to transfer control of shareholder resolutions from federal oversight to individual states, potentially weakening the impact of activist investors. In a regulatory notice, the SEC stated it would review changes to Rule 14a-8, which dictates shareholder proposal rules for annual proxy statements, including minimum ownership thresholds.

SEC Chairman Paul Atkins has raised concerns that the current rule exceeds the Commission's authority and infringes on state laws, prompting a potential rescission of the rule and a return of regulation to states. Investor resolutions have become a focal point of corporate annual meetings, with topics such as environmental concerns and executive compensation, though their prominence has waned.

However, the shift to state regulation could introduce inconsistencies, as regulations vary among states. For example, Texas law requires significantly more shares to bring a resolution to a vote than the current SEC threshold. Investor groups anticipate a response to the SEC's legal arguments regarding its authority. The SEC also plans to modernize the proxy solicitation process to accommodate technological advancements and evolving shareholder communication practices.