Bill Overview
Title: Restoring Shareholder Transparency Act of 2022
Description: This bill limits corporate shareholder proposals and revises proxy voting protocols for shareholders. Current shareholder proposal rules address who is eligible to submit shareholder proposals for a vote and the dissemination of information to voters through a proxy statement. Under the bill, a company is not required to comply with these shareholder proposal rules. Instead, a company may opt-in to these rules. The bill also revises these rules to require a shareholder hold at least 1% of the market value of the company's securities in order to submit a shareholder proposal. Under current rules, a shareholder's ability to submit a proposal depends upon the dollar amount of shares held and the length of time the shares have been held. It also revises these rules to provide that a company's allowed bases for exclusion of a proposal apply without regard to whether the proposal relates to a significant social policy issue. Under current guidance, a shareholder proposal may overcome a company's exclusion if the proposal is of social policy significance. Finally, the bill generally prohibits proxy voting advice furnished by a person who provides such advice for a fee.
Sponsors: Sen. Hagerty, Bill [R-TN]
Target Audience
Population: People who own shares in publicly traded companies or who are involved in providing proxy voting advice
Estimated Size: 15000000
- The legislation impacts corporate governance, investor relations, and shareholder engagement.
- Around the world, there are millions of companies with active shareholders who typically pay attention to shareholder proposals and proxy voting protocols.
- Restricting shareholder proposals to those who hold at least 1% of market value of securities lowers the pool of individuals who can influence corporate decisions globally. This affects both educated, affluent investors and everyday investors.
- Proxy voting is a common aspect of corporate governance across listed companies around the world.
- Globally, shareholder involvement is an aspect of investment for both institutional and individual investors.
Reasoning
- The Restoring Shareholder Transparency Act primarily affects affluent and invested individuals since it mandates significant financial stakes to influence corporate governance.
- Because the policy restricts shareholder eligibility, it reduces the influence of smaller stakeholders and individuals who generally use their right for social policy changes.
- It shifts the power balance towards larger investors (1% or greater). The estimated impact range suggests limited direct effect on average Americans, emphasizing institutional investors.
- While covering a broad aspect of investor relations and governance regulations, the budget limits restrict extensive execution, indicating that the reach will likely concentrate on larger publicly traded companies and significant shareholders.
- Proxy advisory firms that offer advice for a fee could face constraints, impacting their operations and the information flow to smaller shareholders possibly affecting transparency and financial decisions.
Simulated Interviews
Investment Analyst (New York, NY)
Age: 45 | Gender: female
Wellbeing Before Policy: 8
Duration of Impact: 5.0 years
Commonness: 4/20
Statement of Opinion:
- I worry the new rules make it harder for individual investors to push important social policies.
- It might limit the diversity of ideas getting to the boardroom.
- Larger corporations will have outsized influence.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 8 |
| Year 2 | 7 | 8 |
| Year 3 | 7 | 8 |
| Year 5 | 6 | 8 |
| Year 10 | 6 | 8 |
| Year 20 | 5 | 8 |
Software Engineer (San Francisco, CA)
Age: 33 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 3.0 years
Commonness: 12/20
Statement of Opinion:
- I don't hold enough shares to matter under these new rules.
- Feels like the system is only for big players now.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 7 |
| Year 2 | 6 | 7 |
| Year 3 | 6 | 7 |
| Year 5 | 5 | 7 |
| Year 10 | 5 | 7 |
| Year 20 | 5 | 7 |
Retired Educator (Chicago, IL)
Age: 60 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 10.0 years
Commonness: 10/20
Statement of Opinion:
- The new policy might weaken the power of my pension fund's voice in influencing corporate governance.
- It feels like retirees like me are sidelined.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 6 |
| Year 2 | 5 | 6 |
| Year 3 | 5 | 6 |
| Year 5 | 5 | 6 |
| Year 10 | 4 | 6 |
| Year 20 | 4 | 6 |
Entrepreneur (Austin, TX)
Age: 29 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 15.0 years
Commonness: 6/20
Statement of Opinion:
- I'm starting out as an investor and these rules make it harder to push any initiative I care about.
- Feels discouraging for small investors.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 4 | 5 |
| Year 2 | 4 | 5 |
| Year 3 | 4 | 5 |
| Year 5 | 4 | 5 |
| Year 10 | 3 | 5 |
| Year 20 | 3 | 5 |
Non-Profit Director (Seattle, WA)
Age: 50 | Gender: other
Wellbeing Before Policy: 6
Duration of Impact: 10.0 years
Commonness: 3/20
Statement of Opinion:
- This bill significantly limits our advocacy work through shareholder proposals.
- Difficult to ensure corporations listen to social issues without these tools.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 4 | 6 |
| Year 2 | 4 | 6 |
| Year 3 | 4 | 6 |
| Year 5 | 3 | 6 |
| Year 10 | 3 | 6 |
| Year 20 | 2 | 6 |
Corporate Lawyer (Miami, FL)
Age: 40 | Gender: male
Wellbeing Before Policy: 9
Duration of Impact: 8.0 years
Commonness: 4/20
Statement of Opinion:
- The rules simplify dealing with smaller, perhaps less relevant proposals for my clients.
- It allows major players to more efficiently drive direction.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 9 | 9 |
| Year 2 | 9 | 9 |
| Year 3 | 8 | 9 |
| Year 5 | 8 | 9 |
| Year 10 | 8 | 9 |
| Year 20 | 7 | 9 |
Financial Advisor (Boston, MA)
Age: 37 | Gender: female
Wellbeing Before Policy: 8
Duration of Impact: 7.0 years
Commonness: 8/20
Statement of Opinion:
- It'll change how I advise clients concerning shareholder engagement strategies.
- The hurdles are now bigger for smaller investors.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 8 |
| Year 2 | 7 | 8 |
| Year 3 | 7 | 8 |
| Year 5 | 7 | 8 |
| Year 10 | 6 | 8 |
| Year 20 | 6 | 8 |
Stockholder Relations Manager (Denver, CO)
Age: 55 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 5.0 years
Commonness: 5/20
Statement of Opinion:
- The new policy potentially slows down our response times, integrating a different protocol of handling proposals.
- Will freeze out smaller investors more.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 6 | 7 |
| Year 5 | 6 | 7 |
| Year 10 | 6 | 7 |
| Year 20 | 6 | 7 |
College Student (Philadelphia, PA)
Age: 22 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 4.0 years
Commonness: 14/20
Statement of Opinion:
- I will probably never own 1% of a company. This feels like a setback for learning and participating.
- Might be best to just passively invest now.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 5 |
| Year 2 | 5 | 5 |
| Year 3 | 4 | 5 |
| Year 5 | 4 | 5 |
| Year 10 | 4 | 5 |
| Year 20 | 4 | 5 |
Proxy Advisory Consultant (Los Angeles, CA)
Age: 48 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 10.0 years
Commonness: 2/20
Statement of Opinion:
- These constraints on proxy advice could hurt business.
- Clients will receive less guidance in navigating shareholder proposals.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 7 |
| Year 2 | 6 | 7 |
| Year 3 | 5 | 7 |
| Year 5 | 5 | 7 |
| Year 10 | 5 | 7 |
| Year 20 | 4 | 7 |
Cost Estimates
Year 1: $50000000 (Low: $30000000, High: $70000000)
Year 2: $50000000 (Low: $30000000, High: $70000000)
Year 3: $50000000 (Low: $30000000, High: $70000000)
Year 5: $52000000 (Low: $32000000, High: $72000000)
Year 10: $55000000 (Low: $34000000, High: $75000000)
Year 100: $100000000 (Low: $60000000, High: $140000000)
Key Considerations
- Shareholder oversight on corporate practices may decrease due to tighter proposal submission requirements.
- Impact on investment strategies of institutional investors like mutual funds and pension funds.
- Potential reduction in advocacy through shareholder proposals on social and environmental issues.
- Corporate governance changes affecting large numbers of retail investors.