The US Securities and Exchange Commission (SEC) has made permanent its decision to cease judging whether companies may exclude shareholder resolutions from votes at annual meetings. This change, announced on Friday, extends a freeze put in place last November on deciding whether to approve corporate requests to skip votes on shareholder proposals.

Impact on Investor Activists

Investor activists are concerned about diminishing influence as a result of this change. The SEC’s Division of Corporation Finance will focus resources on a broader review of filings, according to the agency’s statement. The change has not had a significant impact so far, with 66% of known proposals placed on proxies as of June 15, compared to 59% last year.

SEC Chairman Paul Atkins has called CEOs ‘lackadaisical’ about using tools like the new policy. Investor activists often have to file lawsuits to ensure votes on some items. Tim Smith, senior policy advisor for the Interfaith Center on Corporate Responsibility, said, ‘Instead of having the SEC operate as an informal referee, now investors will be forced to consider other options if a company decides to unilaterally omit a resolution with inadequate arguments.’

Marc Lindsay, managing partner of corporate governance at Jasper Street Partners, noted that the change effectively increases litigation risk for companies excluding proposals. Five of six lawsuits filed over exclusions led to favorable outcomes for proponents, he said.

Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.