SEC Should Limit Gadflies’ Clout in Proxy Votes, Gallagher Says

The U.S. Securities and Exchange Commission should limit the ability of small investors to propose items for a vote in corporate elections, a top regulator said today.

The restriction would limit the ability of “activists” and “corporate gadflies” to seek small shareholders to sponsor controversial resolutions, SEC Commissioner Daniel M. Gallagher said today. Current SEC rules allow shareholders who own $2,000 worth of company stock for one year to submit proposals for a vote at the business’s annual meeting.

The $2,000 threshold is “absurdly low,” and the bar should be raised to “perhaps $200,000 or even better, $2 million,” Gallagher said in a speech at Tulane University Law School’s Corporate Law Institute. A percentage threshold would be more practical because it would fit companies regardless of the value of outstanding shares, he said.

“Requiring a sufficient economic stake in the company could lead to proposals that focus on promoting shareholder value rather than those championed by gadflies with only a nominal stake in the company,” said Gallagher, a Republican commissioner.

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