Trillium’s Statement Regarding the Financial CHOICE Act

May 22, 2017 // Boston, MA: Among the many deregulatory efforts that have been launched in Congress this year is an attack that is focused directly on one of the central pillars of shareholder advocacy – the shareholder proposal. Shareholder proposals are important to our work because they provide a compelling channel of communication with corporate boards and managers on environmental, social, and governance issues.
Shareholder proposals have led to greater board diversity, more inclusive workplaces, new corporate climate change policies, more accountable boards, and many other improvements at the corporate level. For over 70 years they have provided a marketplace of ideas that is beneficial for investors, companies, the U.S. economy, and society.
However, the Business Roundtable and Republican leadership in Congress are pushing Section 844 of the Financial CHOICE Act, which for all intents and purposes would end the shareholder proposal process as we know it. It would raise the ownership requirement for filing a shareholder proposal to 1% ownership for three years. As an example, this would mean that an investor in Wells Fargo would have to hold approximately $2.7 billion of Wells Fargo shares. Only 10 investors hold that much and, to the best of our knowledge, they have never filed a shareholder proposal. In the meantime smaller, but no less important, investors have filed shareholder proposals pressing the company on its mortgage practices, human rights, customer fraud, and poor corporate governance.
It would also have an impact on clients of asset management firms because it prohibits filing shareholder proposals on behalf of another person. Not only would this insert significant friction into the filing process, but it represents government interference in the fiduciary relationship between investor and advisor. Experience shows that in the absence of the right to file a shareholder proposal, minority shareholders may be ignored, and companies will act as if they are “too big to listen.”
This is why Trillium has devoted considerable time and attention to fighting Section 844. We are playing an important leadership role with organizations like US SIF, the Interfaith Center for Corporate Responsibility, the Council of Institutional Investors, and Ceres, alongside our fellow asset managers to stop Section 844. This broad and collaborative effort will be incredibly effective in demonstrating the support the shareholder proposal process has in the investor community.
At Trillium, we have been in contact with Republicans and Democrats on the House Financial Services Committee and Senate Banking Committee, both providing written comments and briefing information, as well as initiating meetings and discussions with their offices. Section 844 is currently awaiting a vote before the full House of Representatives.
If you would like to join the effort, here are two things you can do:

1. Add your name to a petition that has been launched by As You Sow, and/or

2. Contact your Member of Congress through an email, letter, phone call, or meeting. To assist you in that effort we are providing a template letter developed in this collaborative effort that can inform your communications.

Thank you again for your support of the shareholder proposal process and this vitally important work. Please feel free to contact us with any questions or additional thoughts.

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Important disclosure: The information provided in this material should not be considered a recommendation to buy or sell the security mentioned. It should not be assumed that investments in such security has been or will be profitable. To the extent a specific security is mentioned, it was selected by the authors on an objective basis to illustrate views expressed in the commentary and it does not represent all of the securities purchased, sold or recommended for advisory clients. The information contained herein has been prepared from sources believed reliable but is not guaranteed as to its timeliness or accuracy, and is not a complete summary or statement of all available data. This piece is for informational purposes and should not be construed as a research report.