Your Shareholder Rights are at Risk

July 19, 2017

Have you ever felt like you could help a company do better?

You’ve probably thought of ways that a company could improve a product or service, or maybe you’ve got an idea of how a company could more efficiently use its resources. But you likely felt powerless to really do anything about it.

Investors have power

As an investor, though, you have the power to help companies do better.

The Securities Exchange Act of 1934 gives you the right to file shareholder resolutions and vote on these proposals at company meetings, and this gives you a say in how a company operates.

Investors have used these rights to help hundreds of companies make significant improvements, like cleaning up products for children by getting toxins out, saving money on electricity, or disclosing how much money companies spend on lobbying and political contributions.

Shareholders have filed more than 700 proposals in the last two years alone, according to the U.S. Forum for Sustainable and Responsible Investment (USSIF).

In May 2017, ExxonMobil shareholders voted to require the oil company to report on how climate change regulations will affect its bottom line, something most other major oil companies, like BP and ConocoPhillips, are already doing.

Even if a particular proposal doesn’t pass, it still can make a difference by bringing an important issue to the attention of company management. “The process of filing often prompts productive discussion, leading to agreements between the filers and management that enable the filers to withdraw their resolutions,” USSIF noted in its biennial 2016 report on trends in sustainable investing.

New legislation puts your rights at risk

Your right to use shareholder resolutions to engage with a company is currently at risk, however. The U.S. House of Representatives recently passed the Financial CHOICE Act of 2017. Section 844 of the Act would make it nearly impossible to file shareholder resolutions by raising the ownership requirement from $2,000 worth of shares for one year to 1% of the company’s outstanding stock for three years.

To put this in perspective, a current shareholder of Well Fargo would have to hold $2,000 worth of Wells Fargo shares for one year to file a resolution. Under the new proposed legislation, the same shareholder would need to own approximately $2.67 billion in Wells Fargo stock for three years to file a resolution.

This isn’t just true of Wells Fargo. To engage with most Fortune 100 companies, you’d need to own at least $1 billion in stock in order to meet the 1% threshold.

This proposed change essentially disqualifies all but a small number of fund managers (like BlackRock and Vanguard, who rarely file or vote on shareholder resolutions, although both appear to have voted with ExxonMobil shareholders recently on climate change) from exercising their rights.

Smaller shareholders have brought important issues to the attention of company management. Eugene Stoltz, an associate professor at Harvard Business School who has studied shareholder proposals, told the New York Times that “the idea that bigger shareholders create ‘better’ proposals is not supported by empirical data.”

What can YOU do?

Our firm began in 1969 as a way to empower individual investors, and we continue to believe that all investors, not just the very largest, should have the right to file proposals and vote on key issues.

If you are concerned about losing your rights, contact your Congressional representatives and voice your opposition to the Financial CHOICE Act.

This article originally appeared on Forbes.

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