Typically nonbinding, shareholder plans give shareholders a figurative seat in the boardroom desk, and a well-crafted pitch can send a powerful sign to supervision about what investors want.

Within US Securities useful link and Exchange Commission rules, a shareholder can petition the company to include a proposal in the proxy for vote on the annual assembly of investors. The company need to add the proposal to the ballot if perhaps it meets certain requirements, which includes having been posted by a “qualified” shareholder the master of at least $2, 1000 of stock or 1% of the company’s outstanding stocks and shares. Proponents generally file their proposal with the company at least six months in advance of the meeting.

Shareholder proposals are usually submitted by simply activists or policy groups seeking to boost specific goals. In recent years, many of these plans have devoted to environmental, sociable and governance (“ESG”) issues, such as demanding companies to disclose their ESG policies, or perhaps setting restrictions on business compensation.

A large number of shareholder proposals fail, sometimes generate significant investor support and are also considered serious enough to be a focus for escalation by the company’s mother board of owners. In such cases, the company may decide to negotiate with the proposal’s supporter for a relief agreement which would address key points of the pitch.

A successful shareholder proposal could also lead to advertising attention, which is often a crucial stepping stone with regards to future escalation measures. For that reason, the company must develop a great engagement system in advance of the proposal, and consider a post-vote communication strategy, including a media plan, as well as up coming steps in case the proposal breaks down. Covington’s country wide recognized political law and securities practice teams contain extensive cross-disciplinary experience guidance public firms on politically oriented shareholder proposals.