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One of the Institute's Founding Innovator members - socially responsible investors  Pekin Singer Strauss Asset Management, managers of the Appleseed Fund (APPLX, APPIX) - asked us to get the following alert and CALL TO ACTION on a new proposed legislation that "all but eliminates one of the most democratic and meaningful shareholder rights from our capital market system and silence the voices of millions of small shareholders who have a right to be heard".  Please read the following:


One of the hallmarks of a well-functioning capital market system and a well-functioning democracy is the ability of shareholders to participate in the oversight and stewardship of the companies that they own. In the United States, the primary means by which shareholders can accomplish this is through the shareholder proposal process. The SEC’s shareholder proposal rule (Rule 14a-8 of the Securities and Exchange Act of 1934) created one of the most important and powerful tools that shareholders have available to them to influence the way that the public companies they own are managed. The law was specifically passed in order to give more power to the small shareholder, and the law continues to serve that critical role to this day. 

In its current form, the rule provides that any shareholder who owns at least $2,000 worth of a company’s shares for a minimum of one year may submit a proposal to be included in that company’s proxy statement. Proposals may deal with governance issues or board structure, climate change-related issues, lobbying or political activities, corporate reporting, or any number of other issues. The proposal rules allow shareholders of nearly any size to have their ideas or concerns heard by the entirety of the shareholder base. The current rules provide for a fair and effective way for shareholders big and small to effect change in the companies that they own, but that may not be the case for long. 

The House Financial Services Committee is currently reviewing a draft piece of legislation, called the Financial CHOICE Act of 2017, which would cripple the shareholder proposal process. This proposed legislation would eliminate key parts of the Dodd-Frank Act and would impose new restrictions on shareholder proposals that would render the process effectively meaningless. Under the proposed changes, only shareholders who have owned at least 1% of a company’s outstanding shares for a minimum of three years would be able to submit shareholder proposals. This would exclude the vast majority of shareholders of public companies from the proposal process, taking economic and political power away from small investors. 

The proposed legislation would be a blow to market capitalism and to democracy.  The shareholder proposal rules, in their current form, allow broad-based participation in the generation of important shareholder ideas.  Good ideas can come from all sizes of shareholders, not just the few largest players.  Proponents of this legislation claim that it is designed to discourage “corporate gadflies” from submitting proposals that will receive little shareholder backing, but we believe that this legislation is really designed to take pressure off of management teams and boards by limiting their accountability to shareholders and to concentrate additional power into the hands of the largest shareholders. 

The current shareholder proposal rules function quite effectively, allowing shareholders to decide which ideas have merit and which do not, regardless of the source of the proposal; the proposed legislation is a solution searching for a problem.  Imposing draconian restrictions on who can and cannot submit shareholder proposals would dramatically reduce the number and diversity of ideas being put in front of shareholders and would only serve to further insulate management teams and boards from their real bosses: their shareholders.  Management teams and boards need to be accountable to ALL of their shareholders, not just the largest shareholders with the coziest relationships and the deepest pockets. 

Indeed, our own experience illustrates just how effective the current shareholder proposal process can be. In 2015, our firm, Pekin Singer Strauss Asset Management, advisor to the Appleseed Fund (APPLX, APPIX), submitted a shareholder proposal to Nabors Industries, requesting that the board publish a comprehensive sustainability report. Our proposal received more than 51% of the 230 million shareholder votes cast, ultimately leading to the publication of the company’s first sustainability report in December of 2015.  This, despite the fact that our investors owned less than 0.2% of Nabors’ shares outstanding .  This success would never have occurred under the draft legislation, as our proposal would never have seen the light of day. We suspect that our experience was not an isolated incident.  Proposals such as ours which ask companies for increased transparency and greater focus on sustainable operations benefit all stakeholders, regardless of size. The inclusive nature of the current shareholder proposal process allowed our idea to be heard by the entire Nabors shareholder base, and Nabors is now a more responsible corporate citizen because thousands of shareholders, big and small, believed our proposal was in their best interests. 

The proposed changes to the shareholder proposal rules would all but eliminate one of the most democratic and meaningful shareholder rights from our capital market system and silence the voices of millions of small shareholders who have a right to be heard. 

We urge you to make your voice heard by contacting your Congressional representative and expressing your concern over these proposed changes. Please click here for a draft letter that you can customize and send to your representative to let him or her know where you stand on this critical issue. 

This article was orininally posted on Harvest Exchange


About Pekin Singer Strauss Asset Management 

Founded in 1990 and based in Chicago, Pekin Singer Strauss Asset Management helps its clients develop and meet their financial goals through customized investment portfolios and a prudent, disciplined, value-investing approach.  The firm offers wealth management services and serves as the adviser to a value-oriented mutual fund.  When we invest, we employ a combination of top-down and bottom-up approaches where we seek out undervalued investments and asset classes using a prudent, risk-averse, value investing approach.  As the stewards of our clients’ investable capital, we focus on preservation of capital first and foremost, and we seek out situations where the risk-reward profile is attractive.  Pekin Singer Strauss Asset Management is registered with the SEC as an investment adviser, and the firm is a certified B Corporation. For more information, visit 


About the Author 

Matthew Blume is a Portfolio Manager of private client accounts and the Director of Sustainability Research at Pekin Singer Strauss Asset Management. Matthew manages all of Pekin Singer’s shareholder advocacy efforts, including shareholder proposals. Read Matthew’s full bio here 


The Institute for Innovation Development is an educational and business development catalyst for growth-oriented financial advisors and financial services firms  determined to lead their businesses in an operating environment of accelerating business and cultural change. We position our members with the necessary ongoing innovation resources and best practices to drive and facilitate their next-generation growth, differentiation and unique community engagement strategies. The institute was launched with the support and foresight of our founding sponsors - Pershing, Voya Financial, Ultimus Fund Solutions, Fidelity, and Charter Financial Publishing (publisher of Financial Advisor and Private Wealth magazines). For more information click here  


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