from USSIF's Shareholder Rights Rulemaking Toolkit:
Sample Letter – Rule 14a-8
[Firm letterhead]
Via email to [email protected] [or method you choose]
[Date]
Vanessa A. Countryman
Secretary Securities and Exchange Commission
100 F Street NE
Washington, DC 20549-1090
RE: Proposed Rule on Procedural Requirements and Resubmission Thresholds under Exchange Act Rule 14a-8; File Number S7-23-19
Dear Ms. Countryman:
On behalf of FIRM_NAME, I welcome the opportunity to provide this comment letter on the “Proposed Rule on Procedural Requirements and Resubmission Thresholds under Exchange Act Rule 14a-8,” File Number S7-23-19.
[insert paragraph about your firm. Consider including what your firm does, your AUM (if you have AUM), what type of clients you serve, etc.]
The shareholder proposal process is one of the most visible and verifiable ways in which investors can practice responsible ownership. This proposed rule, by changing submission and resubmission thresholds, among multiple other alterations, will make it significantly more difficult for investors to get critical issues on the meeting agendas of publicly traded companies. The proposals, particularly the momentum rule and the prohibition of share aggregation, also increase the complexity of this process.
Investors—including the “main street individual investor” that the SEC has said is a priority—have a multi-decade history of raising critical issues at American companies. Such issues have included board diversity, executive compensation, reduction of greenhouse gas emissions and implementation of non-discrimination policies. These proposals help companies look at concerns before they become crises that erode shareholder value, increase reputational risk and harm communities.
The proposal transfers power to management at the expense of their shareholders. Investors have not sought these changes. Corporate trade associations and some issuers are advocating for these changes even though, on average, only 13 percent of Russell 3000 companies received a shareholder proposal in any one year between 2004 and 2017. In other words, the average Russell 3000 company can expect to receive a proposal once every 7.7 years.
[Select specific proposed changes such as the momentum rule or increases in submission, resubmission thresholds, and share aggregation from the “What’s in the Rule” section that you want to add to this letter. Discuss how it may affect your work or clients.]
The shareholder proposal process is one of the least costly ways of alerting companies and their investors to emerging issues, assessing shareholder perspectives and improving governance, disclosure, risk management, and performance. Alternatives to shareholder proposals include voting against directors, lawsuits, books and records requests and requests for additional regulations. Each of these is more onerous and adversarial than including a 500-word proposal in the proxy statement for the consideration of shareholders.
Rule 14a-8 is working for investors. The revisions put forward are unacceptable. The SEC should protect investors’ ability to help hold publicly traded companies accountable rather than creating higher thresholds and more complex rules.
Thank you for your consideration of these comments.
Sincerely,
Name
Title
Sample Letter – Proxy Advisor
[Firm letterhead]
Via email to [email protected] [or method you choose]
[Date]
Vanessa A. Countryman
Secretary Securities and Exchange Commission
100 F Street NE
Washington, DC 20549-1090
RE: Proposed Rule on Amendments to Exemptions from the Proxy Rules for Proxy Voting Advice; File Number S7-22-19
Dear Ms. Countryman:
On behalf of FIRM_NAME, I welcome the opportunity to provide this comment letter on the “Amendments to Exemptions from the Proxy Rules for Proxy Voting Advice,” File Number S7-22-19.
[insert paragraph about your firm. Consider including what your firm does, what your AUM (if you have AUM), what type of clients you serve.]
The proxy advisor proposal will give corporate management substantial editorial influence over reports on their companies because it requires proxy advisors to give companies the automatic right to preview their reports and to lobby the authors to change recommendations. Proxy advisory firms help investors meet their fiduciary responsibilities by providing independent, efficient and cost-effective research services to inform their proxy voting decisions.
By giving companies the automatic right to preview proxy advisory firm reports and to lobby the authors to change recommendations, this proposal fosters an inappropriate pro-management bias in proxy advisor reports. Company executives and their lobbyists want to make it harder and more expensive for institutional investors to get the expert advice they need to hold management accountable. This will make it less likely that investors vote against management or vote at all.
The proposed rule points to issuers’ claim that proxy advisory firms wield excessive influence over how institutional investors vote and that institutional investors vote in lockstep with proxy advisor recommendations. This assumption is not supported by the facts. While ISS recommended voting against say-on-pay proposals at 12.3% of Russell 3000 companies in 2018, just 2.4% of those companies received less than majority shareholder support on their say-on-pay proposals. In 2019, Glass Lewis recommended in favor of 89% of directors and 84% of say-on-pay proposals, while directors received average support of 96% and say-on-pay proposals garnered average support of 93%. These examples demonstrate that investors don’t blindly follow proxy advisor recommendations. In fact, according to ISS, 85% of its top 100 clients use a custom voting policy.
[If you use a proxy advisory service, describe how you interact with them, how you consider their reports as one piece of the overall voting decision, etc.]
Disclosure of conflicts of interest is appropriate for proxy advisory firms. However, this proposed rule goes too far and interferes with the investors’ ability to obtain independent research that is not influenced by company management prior to publication.Thank you for your consideration of these comments.
Sincerely,
Name
Title