By Jonathan Stempel
(Reuters) -A Federal Judge on Thursday renounced a legal case in challenging the changes of the U.S. Securities and Exchange Commission rule which made it more difficult for shareholders to file proposals at the annual meetings of companies, including for reforms on environmental, social and governance (bishops) issues.
US region judge Reggie Walton in Washington, DC, declined arguments that the SEC had arbitrarily and arbitrarily adopted the changes, including on the alleged excuse he supported corporate opposition to reforms on controversial issues such as climate change and diversity in the workplace.
The SEC was required to decide whether the changes would “promote efficiency, competition and capital formation, and did so,” Walton wrote in a 64 page decision.
Adopted in November 2020, late in the first season of Republican President Donald Trump, the SEC changes increased how many stock shareholders you had to own, and how long they had to own, before submitting proposals.
The changes also added requirements for reintroducing proposals that shareholders had rejected over the last three years.
Plaintiffs was the legal case of June 2021 containing the Interfaith Center on Corporate Responsibility, which represents more than 300 faith-based institutional investors, a shareholder advocacy group as you sow and shareholder advocate James Mcritchie.
They said the SEC, before adopting the rule changes, failed to quantify the benefits of Esg and other shareholders' proposals, or address the expected loss of “billions of dollars in the value of a long -term shareholder” by adding restrictions.
In a joint statement following Walton's decision, the Plaintiffs said the changes were “but hurt shareholders and companies alike. Despite this decision, shareholders will continue to engage corporations on their environmental and social effects.”
The SEC refused to comment.
In seeking the dismissal of the legal proceedings, the SEC stated that the rule changes would help ensure that proposals reflect the interests of all shareholders, and that reintroduced proposals could receive levels of support “likely to lead to action on the company.”
SEC Commissioners voted 3-2 along party lines for the changes, with republican appointments in the majority.
The regulator defended the changes during the administration of Democratic President Joe Biden. The US Chamber of Commerce supported the SEC's position.
The case is an inter-faith center on corporate responsibility et al v sec, US District Court, Columbia area, No. 21-01620.
(Reported by Jonathan Stempel in New York; edited by Cynthia Osterman)