WASHINGTON (Reuters) - U.S. Senate Democrats on Friday introduced a resolution to rescind a rule they say curbs shareholder voting rights, their second move aimed at unraveling business regulations introduced by former President Donald Trump’s administration.
Introduced by Senate Banking Chairman Sherrod Brown, the resolution aims to undo a Securities and Exchange Commission (SEC) rule which investors say curbs their power to push for corporate action on issues like climate change and compensation.
The resolution was introduced under the Congressional Review Act which requires only a simple majority vote in both chambers of Congress to reverse recently finalized rules. Democrats hold slim majorities in the House of Representatives and the Senate.
“These rules were yet another ploy by the Trump Administration to undermine shareholder democracy. Last year’s changes to the SEC rule on shareholder proposals made it much harder for working families and investors to hold corporate management accountable,” said Brown in a statement to Reuters.
“Congress must repeal the rule. We also need to find ways to increase shareholder participation and to make executives more accountable.”
In a major win for the corporate lobby which had pushed for changes to overhaul shareholder voting rights, the SEC in September raised the stock ownership threshold at which investors can force a shareholder vote on specific issues.
It said it was modernizing its rules to stop resolutions hanging around on corporate ballots with diminishing support, but critics saw it as an attempt to stifle shareholder activism on environmental, social or corporate governance issues.
The SEC, now led by Democratic acting chair Allison Lee, who voted against the September rule, declined to comment.
Barbara Roper, a director at the Consumer Federation of America, applauded Friday’s move, noting that under the Congressional Review Act the SEC would be forbidden from writing a similar rule in future.
“This is a rule that is ideally suited for CRA. It is designed to dramatically curtail shareholder rights and discriminates against retail investors,” she said.
Industry groups, like the National Association of Manufacturers, outcried Friday’s move as “heavy-handed.”
“The NAM does not believe the CRA is the appropriate mechanism for review of the SEC’s rule to modernize the proxy process [...] and looks forward to engaging with the SEC to defend the vital reforms included within it.”
Tom Quaadman, an executive at the U.S. Chamber of Commerce told Reuters that if successful, the CRA resolution “would bring us back to a world where institutional investors were rare and shareholder communications sparse,” adding that the Trump-era measures were meant to modernize rules that were “antiquated, inefficient and drowned out important issues for consideration.”
Friday’s move followed an earlier resolution introduced by Democrats on Thursday to reverse another Trump-era rule which consumer groups said allows predatory lenders to evade state interest rate caps.
Speaking to Reuters on Friday, a staff member in the office of Congressman Jesus “Chuy” García, who is backing the earlier resolution in the House, said Democrats had the votes in both chambers to get it through.
“Undoing this measure protects Americans in red and blue states, who equally agree that states should have interest rate caps,” said the staff member, who spoke on condition of anonymity. “The Trump-Era True Lender Rule discouraged these state-set caps, and it’s time we repeal the harmful rule and enable states to put a stop to predatory lending.” (This story corrects to add missing period after “she said” in 10th paragraph)
Reporting by Katanga Johnson; Editing by Chizu Nomiyama, Aurora Ellis and Jonathan Oatis
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