The New York State comptroller has written to companies he has filed shareholder resolutions at regarding the Securities and Exchange Commission’s (SEC) recent changes to the no-action process, Responsible Investor can reveal.
Thomas DiNapoli, who is the trustee of the New York State Common Retirement Fund, reached out to 10 companies including Ford Motor, Mastercard, Palantir, JetBlue Airways and Universal Health Services. At the time of publication, none had responded to a request for comment.
The comptroller, who has filed a number of proposals in the past, is this year targeting firms with resolutions on a range of issues, including political spending disclosure, AI and deforestation.
His letter is in response to an announcement by the SEC’s corporate finance division in November that it would stop responding to and providing views on the majority of no-action requests. This means companies that intend to exclude proposals from their proxy materials can do so without waiting for the regulator’s opinion.
A number of stakeholders, including investors and investor associations, have pushed back against the SEC’s move.
DiNapoli’s letter said the move poses challenges for companies and shareholders alike, and that reports indicate that without the process some shareholders may turn to litigation, vote no campaigns, or other “public-facing strategies”.
He told RI that the fund “may consider” these tactics also.
DiNapoli said the fund highly values constructive engagement and views shareholder proposals as essential for facilitating dialogue and signalling investor priorities without mandating board and management action.
“The fund believes that unilateral exclusion of such proposals by companies undermines vital shareholder rights and hinders effective communication between shareholders and companies.
“As a long-term investor, the fund is fully prepared to substantively engage in good faith on any proposal at issue and assess potential withdrawal where appropriate.”
DiNapoli concluded the letter by asking companies to communicate with the fund before proceeding with an exclusion notice.
Under the regime, companies must notify the SEC and filers if they intend to exclude a proposal, although this is “informational only”.
If a company wants a response to this notification, it must submit its rationale for doing so, setting out the “reasonable basis” to exclude the proposal. The SEC said it will then respond with a letter based solely on the issuer’s rationale, indicating that it will not object if the proposal is omitted.
The SEC said the division will not evaluate the adequacy of the representation or express a view on the reasons the company intends to rely on in excluding the proposal.