SEC Votes to Change Shareholder Proposal Process

November 15, 2019

The Securities and Exchange Commission voted to update the shareholder proposal process by increasing the eligibility criteria for submitting and resubmitting shareholder proposals.

Currently, any individual owning $2,000 of shares in a company for one year can submit a shareholder proposal to that company.  Additionally, shareholder proposals can be resubmitted annually to a vote upon hitting extremely low voting thresholds of 3% in year one, 6% in year two, and 10% in year three and beyond.

The announced changes include:

  • Update to Shareholder Proposal Eligibility Requirements: Under the proposal, an individual must own at least $2,000 in stock for three years—up from one year—to submit shareholder proposals at a company at that ownership level.  For individuals owning company shares for one year, the dollar threshold for submitting a proposal is $25,000, and for those owning shares for two years, it is $15,000.
Years owning stockRequired ownership stake to submit proposal
  • Update to the shareholder proposal resubmission thresholds:   Existing shareholder proposal rules allow proposals to be resubmitted to a company in multiple years so long as the proposals meet certain levels of voting support during a moving five-year window, per the chart below:
Number of proposal submissions in last 5 yearsCurrent rules: prior year support level neededProposal: prior year support level needed
Second Submission3%5%
Third Submission6%15%
Fourth or More 10%25%

  • Tightens the “one proposal” rule:  The SEC’s proposal updates the “one proposal” rule to clarify that a single person may not submit multiple proposals at the same shareholder’s meeting, whether the person submits a proposal as a shareholder or as a representative of a shareholder.  Previously, a shareholder could submit multiple proposals at a company by doing so on behalf of other individuals.

A 60-day comment period now begins, where the SEC will solicit public input on the workability of the proposals in preparation for finalizing a rule.  The Association’s Center On Executive Compensation will file comments with the Commission supportive of the changes.