The modified version of the legislation, CHOICE Act 2.0, released by House Financial Services Committee Chairman Jeb Hensarling (R-TX), is mostly known for proposing major financial regulatory reforms. Tucked into the lengthy bill, however, are several significant changes that would completely overhaul the shareholder proposal process. Some are similar to proposals by the Business Roundtable, which we previously discussed here.
Ownership Threshold. Currently, Rule 14a-8 allows any shareholder who owns at least $2,000, or 1%, of a company’s stock to offer a proposal for inclusion in the company’s proxy statement for the annual meeting. The CHOICE Act changes that ownership and holding requirement to permit submission of proposals by only a shareholder owning 1% of the company’s securities entitled to vote on the proposal, or such greater percentage as determined by the SEC, so long as the shareholder has held the stock for a minimum of three years.