In September 2020, the SEC finalized rules which adjusted shareholder proposal eligibility to reflect modern financial markets. However, the rules were quickly criticized by both advocacy organizations and members of Congress for silencing shareholder proposals related to ESG risks such as climate change and diversity, equity, and inclusion. On March 26, Senator Sherrod Brown (D-OH), Chairman of the Senate Banking Committee, submitted a Congressional Review Act resolution to rescind the shareholder proposal rules. The resolution, if it comes forward, could not be filibustered.
Last summer, the Center noted that several of the SEC’s actions in the second half of 2020 would be eligible for repeal under the Congressional Review Act including shareholder proposal eligibility rules, proxy advisor reform, and human capital disclosure. However, Congress has only moved forward on the shareholder rules. Under the terms of the Congressional Review Act, if the resolution is passed, the rules will revert to their previous form and the SEC would be prevented from any additional rulemaking absent a Congressional bill.
The SEC has indicated it is willing to consider enhanced and more prescriptive human capital and environmental risk disclosure rules. Therefore, it is unlikely the CRA would be used to undo the 2020 rulemaking as Congress would need to pass a full bill (subject to the Senate filibuster) to address HCM disclosures.
Meanwhile, SEC Chair nominee Gary Gensler and Acting Chair Allison Lee have indicated they feel proxy advisors serve a needed role in the market but have stopped short of wholesale disagreement with the 2020 reforms. Similarly, while some members of Congress have offered some support to proxy advisors, a similar resolution to rescind that rulemaking seems unlikely.
