SEC Chair Says Agency Aims to Curb Shareholder ESG Proposals (1)

The Securities and Exchange Commission will rethink a federal regulation that requires companies to include ESG-related shareholder proposals in their proxy filings, chairman Paul Atkins said late Thursday.

Atkins, speaking at the University of Delaware, said the SEC’s previous position had driven the “politicization of shareholder meetings.”

Eight decades after the rule on shareholder proxy access was first promulgated, changing circumstances—including the falling number of publicly traded US corporations—call for a fresh look at “the rule’s fundamental premise,” he said, specifically criticizing investor initiatives tied to environmental, social and governance goals.

The agency is now set to reevaluate whether investors should “be able to force companies to solicit for their proposals—to the extent that shareholder proposal is a proper subject under state law—at little or no expense to the shareholder,” he said. “I think it’s only prudent for the commission to reassess the original intent.”

The announcement reflects a broader campaign by Atkins—who has repeatedly pledged to “make IPOs great again"—to undo the policies pushed by his predecessor, Gary Gensler, in favor of President Donald Trump‘s priorities. In September, he said the SEC is considering curtailing the disclosures companies have to make about the hazards confronting them.

He also pushed the idea of moving from quarterly to semiannual reporting after Trump suggested it.

In an update to its regulatory agenda published in August, the SEC said it’s looking to revise shareholder proposal rules to ease “compliance burdens” and help companies choose what is considered “material” to disclose to investors.

Although it’s a matter of state rather than federal law whether a shareholder proposal should be included in proxy filings, there’s substantial authority suggesting the law in Delaware—home to two-thirds of Fortune 500 companies—frowns on ESG-related proposals, according to Atkins. “I can tell you that I have very high confidence that the SEC staff will honor that position,” he said.

He cautioned, however, that the agency would follow a formal agency rulemaking process that “does not happen overnight.”

Warning to Delaware

Atkins also warned Delaware’s leaders directly that they risk driving companies to other states unless they get on board with the Trump administration’s agenda.

His remarks came at a gala dinner hosted by the university’s Weinberg Center for Corporate Governance. In addition to the agency’s shifting stance toward shareholder proposals, Atkins focused on its embrace last month of mandatory arbitration provisions covering securities fraud claims against companies going public.

The SEC chair delivered the statement to a room filled with VIPs celebrating the center’s 25th anniversary, including Delaware Chief Justice Collins J. Seitz Jr., retired Chancellor Andre G. Bouchard, and former US House Majority Leader Dick Gephardt, all of whom also spoke from the podium.

Atkins’ tone was collegial, but it was hard to miss the unstated “or else” when he discussed the conflict between his agency’s views and Delaware’s recently enacted Senate Bill 95, which bars mandatory arbitration provisions. The statute took effect Sept. 1.

“For companies that consider mandatory arbitration to be a viable aspect of their dispute resolution strategy, SB95 has effectively eliminated Delaware as an option for incorporation,” Atkins said. “I hope that Delaware’s legislature will revisit the prohibition.”

He explicitly raised the specter of a so-called “DExit,” the prospect of a corporate exodus from the world’s corporate capital that has lit a fire under Delaware’s political class in recent years. A few months before SB95 took effect, state lawmakers passed a different bill, SB21, overhauling its best-in-class corporate laws in an effort to restore Delaware’s reputation with founders and other insiders alarmed by a wave of court rulings cracking down on conflicts of interest.

“The pressure is on, and alternatives to Delaware are growing,” Atkins said—a nod to efforts by Texas and Nevada to lure businesses away. He referred in similar terms to another section of SB95 banning bylaws and charter clauses that shift legal fees onto investors who bring unsuccessful corporate lawsuits.

“If SB21 was one step forward by Delaware to modernize its corporation law, the prohibition of mandatory arbitration and fee-shifting for federal securities law claims in SB95 were two giant steps backwards,” he said.

Not long after those remarks concluded, Seitz took the stage to offer the Weinberg Center a tribute. He began with an apparently spontaneous response to Atkins: “We appreciate your views in Delaware, and I’m sure they’ll be considered seriously,” Seitz said.