Investors to Cohn: Don’t Be Messin’ With Our Rights

Institutional investors ask Trump’s National Economic Council head to avoid changes to shareholder rights rules.


A group of institutional investors representing $65 trillion in assets sent a letter last week to Gary Cohn, director of President Donald Trump’s National Economic Council, urging him not to change the current Securities and Exchange Commission shareholder proposal process.

Cohn, previously second-in-command at Goldman Sachs Group, has been given a mandate by Trump — as have others in the president’s administration — to propose cuts to regulations that he and his office identify as being unduly burdensome. The pro-business advocacy group the Business Roundtable (BRT) submitted an earlier letter, dated February 22, to Cohn recommending that, among other things, he encourage the SEC to move forward with its proposed reforms to the shareholder proposal process, which would tighten eligibility for proposals submitted by shareholders as part of the proxy voting process and “enable more exclusions of proposals and repeat submissions.”

The authors of the March 15 letter to Cohn argue that such changes are unnecessary. “Our members are long-term shareholders who can attest to the fact that for over 45 years the shareholder proposal process has served as a cost-effective way for corporate management and boards of directors to gain a better understanding of shareholder priorities and concerns and to benefit from those insights on critical and emerging risks and opportunities,” the investor groups write in the letter, signed by the Principles for Responsible Investment, the Council of Institutional Investors, Ceres’ Investor Network on Climate Risk, the Interfaith Center on Corporate Responsibility, and the U.S. SIF (the Forum for Sustainable and Responsible Investment). “The process has proven to be valuable to numerous companies and has given shareholders an important voice.” The groups also sent a copy of their letter to prospective SEC chair Jay Clayton, who will face the Senate Banking Committee for his confirmation hearing on Thursday.

In particular, BRT objects to SEC Rule 14a-8, which prescribes the terms under which a company must include a shareholder’s proposal in its proxy statement, to be voted on at the annual general meeting. According to the rule, a proposal must be included as long as it does not violate one of the rules of eligibility or procedural requirements. The 13 possible reasons for exclusion include a shareholder submitting more than one proposal, owning less than $2,000 worth of shares or 1 percent of eligible voting shares, and submitting a proposal more than 500 words long. BRT told Cohn, “In too many cases, activist investors with insignificant stakes in public companies make shareholder proposals that pursue social or political agendas unrelated to the interests of the shareholders as a whole.”

The investor groups say the current system is working well, arguing that the 14a-8 process has had a positive effect, “highlighting ineffective corporate governance, enhancing transparency, and promoting corporate actions on a range of environmental, social, and governance issues that promote economic growth and job creation over the long term while increasing long-term shareholder value.”

Widely regarded as a level head in the Trump administration, Cohn — a registered Democrat — witnessed plenty of shareholder resolutions during his time at Goldman Sachs. Shareholders used their rights post-2008 to try to get banks to change some of their actions and governance structure. In particular, Goldman Sachs management has repeatedly successfully advised voting against any proposal to split up the board chair and CEO roles, something many corporate governance advocates are in favor of and which has come up on the proxies of Goldman and other banks that face this issue.