The U.S. Securities and Exchange Commission (SEC) staff issued a new legal bulletin on November 3, 2021, entitled Shareholder Proposals: Staff Legal Bulletin 14L, or SLB 14L for short. This bulletin is intended to reset the shareholder proposal process, particularly in light of investors’ increasing focus on environmental, social, and governance (ESG) issues. 

What Are the Changes to the Shareholder Proposal Process? 

Once a shareholder proposal is submitted, companies can request that the SEC exclude it. The goal of SLB 14L was to revise the criteria the SEC staff will use under Rule 14a-8 in considering companies’ requests to exclude shareholder proposals. SLB 14L makes three main changes. The staff will no longer allow exclusion of proposals:  

  1. on significant social policy issues, if the proposed reason for exclusion is that the issue is not significant to the company in question;  
  2. that seek to establish a timeframe or target to address climate change, on the basis of micromanagement ; and  
  3. that raise issues of broad social or ethical concern related to the company’s business, just because that part of the business is less than 5% of the companies’ assets, net earnings and gross sales. 

The bottom line effect of these changes is that we expect to see more shareholder proposals on environmental and social issues either come to a vote or prompt engagement, and potentially an agreement, because the company and shareholder proponent this proxy season, and fewer ESG proposals being excluded.  

What Is Meant by Environmental, Social, and Governance? 

ESG refers to investors’ consideration of environmental, social and governance factors. Investors and other stakeholders increasingly take these criteria into consideration in their investment and stewardship decisions, evaluating how the business operates in terms of its commitment to environmental sustainability, its treatment of employees, customers, suppliers, and communities, and its practices and procedures related to corporate leadership, executive compensation, audits, and the rights of shareholders. 

Record Voting Support for ESG Proposals 

The 2021 proxy season witnessed a record level of support for ESG proposals. Investors are increasingly recognizing the importance of ESG considerations to their long-term financial results and risk mitigation and are expecting positive change from companies in disclosure and performance on these issues. 

Glass Lewis ESG Solutions  

Glass Lewis evaluates all environmental and social issues through the lens of long-term shareholder value. We believe that companies should be considering material environmental and  social factors in all aspects of their operations and that companies should provide shareholders  with disclosures that allow them to understand how these factors are being considered and how attendant risks are being mitigated. We also believe that a well-governed company will generally manage these issues better than one without a governance structure that promotes  board independence and accountability.  

As investors increasingly recognize the importance of ESG considerations, Glass Lewis solutions can help investors stay informed and facilitate their decision-making on these issues.  

Talk to us today to find out how we can help with your ESG-related decisions.