If enacted, HB 10020 will significantly influence corporate governance and the relationship between shareholders and management. By limiting the number of proposals that can be included in proxy statements, the bill intends to encourage more manageable and coherent shareholder meetings. Supporters argue this will help companies focus on more meaningful proposals that have a material effect on their financial condition, rather than dealing with a plethora of proposals that may not align with corporate interests or shareholder priorities. However, the reduction in proposal limits might be viewed as a diminishment of shareholder rights to influence corporate policy and priorities.
Summary
House Bill 10020, known as the Stop Woke Investing Act, mandates that the Securities and Exchange Commission (SEC) revise its rules regarding shareholder proposals. Specifically, the bill calls for the SEC to enforce a regulation allowing companies to limit the number of shareholder proposals included in their proxy statements, depending on their classification as either non-accelerated, accelerated, or large accelerated filers. For non-accelerated filers, the limit is set to two proposals, while accelerated filers can include four, and large accelerated filers can include up to seven proposals. This legislative move aims to streamline the process for companies and reduce the volume of shareholder proposals that they are required to entertain during their meetings.
Contention
The Stop Woke Investing Act has stirred discussions about the balance of power between management and shareholders. Proponents assert that the existing environment fosters a burdensome number of proposals that can dilute essential governance issues, while opponents worry that the proposed limits could stifle essential discussions on critical corporate governance matters, such as environmental, social, and governance (ESG) factors which these proposals often address. There is a concern that these restrictions could lead to a narrower scope of corporate responsibility and a minimization of diverse shareholder voices in corporate decision-making.
Stop Woke Investing ActThis bill requires the Securities and Exchange Commission (SEC) to amend regulations to limit the inclusion of shareholder proposals in proxy statements. A proxy statement is provided to shareholders prior to a public company holding a shareholder meeting and contains information relevant to a shareholder vote. Under current SEC rules, certain qualifying shareholder proposals must be included on a company's proxy statement, including proposals that raise significant social policy issues.Under the bill, a shareholder proposal must have a material effect on the financial performance of the company to be included in a proxy statement. The bill also establishes a cap on the number of shareholder proposals required to be included in a shareholder meeting, depending on the size and type of the company. In addition, a proposal submitted by a member of the board of directors is prohibited from inclusion as a shareholder proposal.
SOCIAL MEDIA Act Stopping Online Confusion for Investigative Agencies and Law-enforcement by Maintaining Evidence Determined Interparty Arrangements Act