Proposal Omissions on the Rise

A growing number of companies are petitioning the Securities and Exchange Commission to allow for the omission of corporate governance-related shareholder proposals, a RiskMetrics Group analysis of “no action” requests finds. The challenges have led to a spike in proposal omissions this year, with the SEC favoring issuers on a number of key governance measures.

Through March 25, issuers had challenged 33 percent of all governance-related proposals filed this year, compared with just 20 percent in calendar 2007. Challenges by issuers also are more likely to be successful this year than last. For example, 48 percent of last year’s requests for no action were granted, while this year’s figure so far stands at 69 percent, according to RMG’s analysis.

The fact that issuers have challenged one in three proposals filed this year, and that the SEC has allowed seven of 10 to be omitted, is troubling to many investors.

“Companies are doing whatever they can to get rid of shareholder proposals,” argues John Chevedden, a Los Angeles-based shareholder activist, according to RiskMetrics. Chevedden points to this year’s effort by companies to omit proposals on cumulative voting, a long-time proxy issue, as an example of corporate efforts to staunch the filing of investor resolutions.