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‘Corporate Culture War’ Plays Out Over Share Voting Rules

Feb. 6, 2020, 10:31 AM

A “corporate culture war” over how much say investors should have in the companies they own has Inc. workers siding with activist hedge funds against corporate lobbyists seeking to curb shareholder advocacy.

Amazon workers turned activists and activist hedge funds like Third Point have found common ground in opposing new rules for share voting that they say would stifle their voices and undermine corporate democracy, according to public comment letters submitted to the Securities and Exchange Commission.

On the other side are corporate executives and their trade groups, which have argued vote outcomes are overly influenced by proxy advisory firms.

At issue is a set of proposed rules from the SEC, one of which would make it harder for small shareholders to put their own proposals up for a vote on company ballots. Another would add oversight for proxy firms that have become a tool for bigger investors to challenge company executives with their votes.

“The Commission seems to be taking sides in a ‘corporate culture war,’” Richard Liroff, the now retired founder of a shareholder advocacy organization, wrote to the SEC. His letter is one of thousands the commission has received since proposing the rules in November. Submissions were due Feb. 3.

SEC Commissioner Elad Roisman, a Republican leading the proxy rule rewrite, has rejected claims that the agency is siding with corporate lobbyists. Such criticism is based on “misinformation” and “myths,” Roisman said in a Jan. 30 speech.

Activist Investors

The commission is expected to finalize its rules, proposed last November in a 3-2 vote, in the coming months, though it hasn’t given a timeline.

Among those weighing in are Amazon workers who used the stock they get paid in to submit a shareholder proposal pressing the tech giant for more action on climate change. Amazon later set a new carbon-cutting goal just before employees walked out of work in a climate protest.

“As small employee-investors” who lack the clout of big institutional investors, “we depended on the shareholder proposal process to have our voices heard by our fellow investors,” eight current and former Amazon employees said in a Feb. 3 letter to the SEC opposing the rule changes.

The commission has likewise heard objections to its proposed rules from Third Point and Elliott Management, two activist hedge funds that have at times gotten proxy advisers’ endorsement of their campaigns to take over corporate board seats. The rules for proxy advisers would give companies more of a chance to review and rebut voting advice for institutional investors.

“Holding corporate managers accountable through shareholder democracy is hard enough as it is,” Third Point told the SEC.

Other comments backing rule changes for proxy advisers have come from the CEO of Garmin Ltd. and a former executive at General Motors Corp., who said the SEC’s proposal would help bring transparency to the firms’ “often murky practices” and voting advice.

The Chamber of Commerce also criticized proxy advisers for lacking oversight, despite wielding “greater influence over American corporate governance than any state legislature, stock exchange or even the Commission itself,” the Chamber said in a Jan. 31 letter to the commission.

Proxy firms such as Institutional Shareholder Services Inc. and Glass, Lewis & Co. have pushed back in their comments. ISS has also sued the SEC over earlier proxy-related guidance.

To contact the reporter on this story: Andrea Vittorio in Washington at

To contact the editors responsible for this story: Michael Ferullo at; Seth Stern at