(Bloomberg) — The Securities and Exchange Commission released new guidelines making it easier for corporations to block votes on shareholder proposals at their annual meetings.
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Under the new policy, regulators will determine whether a proposal affects at least 5% of a company’s total assets, net earnings or gross sales, according to an SEC legal bulletin released Wednesday. SEC rules allow companies to ask for “no-action” letters to exclude proposals on issues that aren’t economically relevant to their business.
Guidance issued during the early months of former Democratic SEC Chair Gary Gensler’s tenure made it harder for corporations to exclude shareholder proposals that related to significant social and political matters. What followed was an increase in votes related to diversity in hiring, labor practices, the environment and sustainable supply chains, among other issues.
It also opened the door to more proposals from conservative think tanks and policy groups that pushed back on corporate policies on those types of topics.
Under the new guidance, a shareholder “could continue to raise social or ethical issues in its arguments,” the SEC said, but it would need to tie those matters to a significant effect on the company’s business to avoid being excluded by management.
The agency’s action comes in the midst of the 2025 annual shareholder proxy season, and as more US corporations are dropping or reining in diversity, equity and inclusion initiatives.
Democratic SEC Commissioner Caroline Crenshaw criticized the timing of the SEC’s move. Coming during peak proxy season, the changes would bring new costs to corporations to re-tool their no-action requests to exclude proposals, she said in a statement. However, it would have a far more significant impact on shareholders, most of whom will be unable to redesign their proposals this year in line with the new guidance, she said.
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