Spotlight on Investor Reform

In a recent Wall Street Journal article the Chairman of the SEC, Jay Clayton commented on the retail shareholder and their participation on executive pay proposals, board nominees, and issues that are contentious --raised by Activists.

His view, retail participation in such elections is so low and was quoted, "May be a signal that our proxy process is too cumbersome and needs updating."

The SEC may be looking on how to overhaul the proxy voting system.

Wachtell, Lipton in a memo believes that this overhaul will be designed to maximize the long-term interests of the retail shareholder.

How this will be accomplished with a shrinking retail shareholder base and the apathy of the public in general to corporate communications - will be a challenge.

It may have the unwanted effect of making it easier from what has been characterized as "Corporate Gadflies," who – according to a Manhattan institute report that half of all shareholder proposals in 2016 addressed a social or policy matter rather than relevance to the long-term interests of the company.

The report pointed out six individual investors who were responsible for one-third of all shareholder proposals in 2016 and 38% came from institutional investors with a social, religious or policy agenda.

As Wachtell Lipton states, "The Shareholder proposal process has been a costly tool used by few, with little-to-no benefit for the majority of investors.

Let's hope the changes to come do not worsen this situation.