AMERICAN BANKER: Activist bank investors run into an SEC roadblock

By John Prior, October 8, 2020

The Securities and Exchange Commission recently raised the bar for when activist shareholders can force votes on proposals at the annual meetings of public companies.

A new SEC rule governing investor voting could be especially significant to major U.S. banks, which have been under pressure from investors to publish data on racial and gender pay gaps, limit financing of oil and gas companies or take other actions.

The rule doesn’t take effect until 2022, but one of its provisions — which set a higher threshold for the resubmission of proposals that shareholders vote down — has added to the urgency of how activist investors approach proxy season in the spring.

Proposals will now have to receive at least 25% approval among shareholders by the third vote (if they get that far) or be banished from the proxy statement for five years; the current threshold is 10%. Activist investors are worried that the new requirement will hurt their strategy of gradually building support for environmental, social, political and governance proposals over time.

Natasha Lamb, managing partner at the investment firm Arjuna Capital, said in an interview that had the new rule been in place before the 2020 proxy season, the activist investment firm would not have been able to bring at Bank of New York Mellon’s annual meeting a proposal that the bank disclose its median pay gaps among employees of different races and genders. Eight percent of shareholders backed the proposal earlier this year, the firm’s second attempt at passing it.

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