The "Stop Woke Investing Act" amends SEC regulations to limit the number and type of shareholder proposals that companies must include on their proxy cards, focusing on proposals with a material financial impact and granting companies more control over selection.
Andy Biggs
Representative
AZ-5
The "Stop Woke Investing Act" aims to modify SEC regulations regarding shareholder proposals, limiting the number of proposals companies must include on proxy cards based on filer status (non-accelerated, accelerated, large accelerated). It mandates that only proposals with a material financial impact on the company can be included, as determined by the company itself. This act does not require companies to include proposals that are otherwise excludable under SEC rules.
"Stop Woke Investing Act" Limits Shareholder Proposals, Prioritizing Short-Term Profits: New Rules Could Silence Minority Investors
The "Stop Woke Investing Act" (SEC. 1) drastically reshapes how shareholders can influence the companies they invest in, specifically targeting shareholder proposals on company proxy cards. The core change? It restricts the number of shareholder proposals and prioritizes those with a direct, material impact on a company's bottom line, effectively sidelining environmental, social, and governance (ESG) concerns.
Stacking the Deck
This bill, effective within 180 days of enactment (SEC. 2), sets strict limits on how many shareholder proposals can even be considered for a vote. Smaller companies (non-accelerated filers) are limited to just two proposals. Mid-sized companies (accelerated filers) get four, and even the largest corporations (large accelerated filers) are capped at seven (SEC. 2(b)(1)(C)(i-iii)). Crucially, the bill gives companies the power to choose which proposals make the cut, only requiring them to disclose their selection method to the SEC (SEC. 2(b)(1)(C)(iii)). They do not have to choose based on when the proposals were submitted (SEC. 2(b)(1)(C)(iv)).
What Really Matters?
The bill introduces a strict "materiality" requirement (SEC. 2(a)(3)). This means only proposals demonstrating a direct, quantifiable impact on the company's financial performance will be considered. Think immediate profits and losses. Anything deemed "non-material" – environmental concerns, social issues, or even long-term risks – is automatically off the table. For example, a proposal from farmers concerned about a company's pesticide use impacting long-term soil health could be rejected if it doesn't demonstrate an immediate threat to the company's quarterly earnings. Similarly, a proposal advocating for better worker conditions in a tech company's supply chain could be excluded if it doesn't directly impact this quarter's financial statement.
Challenges in Implementation
The "materiality" definition is a major sticking point. By explicitly excluding "non-financial" goals and anything related to "long-term, uncertain, or general events" (SEC. 2(a)(3)), the bill effectively shuts down discussions on crucial, yet potentially less immediately quantifiable, issues. It also raises concerns about potential bias. The bill explicitly states that proposals from company board members cannot be included (SEC. 2(b)(1)(C)(vi)), but it gives considerable power to company management to decide what is and is not 'material'. This raises questions about whether companies will use this power to silence dissenting voices or avoid addressing uncomfortable truths.
Rewriting the Rules
This act significantly alters existing SEC regulations (specifically 240.14a-8), essentially giving companies much greater control over the shareholder proposal process. It also explicitly states that nothing in this bill requires companies to include proposals and even reinforces the SEC's ability to repeal rules that do (SEC. 2(c)(2-3)). In short, it's a significant shift in power away from shareholders and towards corporate management, potentially limiting investor influence on issues beyond immediate financial returns.