satisfied. In addition, we considered whether to apply a different
vote-counting methodology for companies with dual-class voting
structures.\125\ We elected not to propose alternative vote-counting
methodologies, however, because we believe that including these votes
in the voting calculation more accurately captures the sentiment of all
shareholders, including insiders and controlling shareholders.
Nevertheless, we seek comment on whether changes to the current vote-
counting methodology are necessary. We also considered whether to adopt
an exception to the rule that would allow an otherwise excludable
proposal to be resubmitted if there are material developments that
suggest a resubmitted proposal may garner significantly more votes than
when previously voted on. We elected not to propose such an exception,
however, because we believe it would be difficult in many cases to
determine how the intervening developments would affect shareholders'
voting decisions. We seek

comment on whether such an exception should be added to the rule.
---------------------------------------------------------------------------

    \125\ Cf. letter in response to the Proxy Process Roundtable
from CtW Investment Group dated January 16, 2019 (noting that
increasing the resubmission thresholds will make it more difficult
to satisfy the resubmission thresholds at companies with dual-class
voting structures); letter in response to the Rulemaking Petition
from the Shareholder Rights Group dated October 5, 2017 (``When one
considers dual class share ownership, insider ownership and the non-
involvement of passive investors, the percent of support for a
proposal reflected by the Rule's counting methods may reflect a
sharp underestimate of the support by those investors known to
actively consider shareholder proposals.'').
---------------------------------------------------------------------------

Request for Comment
    37. Should we maintain the current approach of three tiers of
resubmission thresholds but increase the thresholds to 5, 15, and 25
percent, as proposed? Would alternative thresholds such as 5, 10, and
15 percent, or 10, 25, and 50 percent, be preferable? If so, what
should the thresholds be? Should we instead adopt the thresholds that
were proposed by the Commission in the 1997 Proposing Release (i.e., 6,
15, and 30 percent)? Do the proposed resubmission thresholds better
distinguish those proposals that are on a path to meaningful
shareholder support from those that are not?
    38. Alternatively, should we remove resubmission thresholds for the
first two submissions and, instead, allow for exclusion if a matter
fails to receive majority support by the third submission within a
certain number of years? Under such an approach, what would be an
appropriate lookback period and how long should the cooling-off period
be (e.g., three years, five years, or some other period of time)?
    39. What are the estimated costs companies incur as a result of
receiving resubmitted proposals? Are the costs different for
resubmitted proposals than for initial submissions? In particular,
which specific costs incurred (e.g., printing costs, staff time, fees
paid to external parties such as legal advisors or proxy solicitors,
management time, board time, etc.) may differ between resubmitted
proposals and initial submissions?
    40. Is there a voting threshold that, if not achieved initially, a
proposal is unlikely to surpass in subsequent years? Conversely, is
there a voting threshold that, if achieved, a proposal is unlikely to
fall below in subsequent years?
    41. Should we shorten or lengthen the relevant five-year and three-
year lookback periods? If so, what should the lookback periods be?
    42. Should the vote-counting methodology under Rule 14a-8(i)(12) be
revised? For example, should shares held by insiders be excluded from
the voting calculation, or should broker non-votes and/or abstentions
count as votes ``against''? Should there be a different vote-counting
methodology for companies with dual-class voting structures? If so,
what should that methodology be?
    43. Would the proposed changes in resubmission thresholds
meaningfully affect the ability of shareholders to pursue initiatives
for which support may build gradually over time? Do legal or logistical
impediments to shareholder communications affect the ability of
shareholders to otherwise pursue such longer horizon initiatives? If
so, how? Are there ways to mitigate any potential adverse effects of
the proposed resubmission thresholds while limiting costs to companies
and shareholders?
    44. When considering whether proposals deal with substantially the
same subject matter, the staff has focused on whether the proposals
share the same ``substantive concerns'' rather than the ``specific
language or actions proposed to deal with those concerns.'' Should we
consider adopting this standard, or its application? Should we consider
changing this standard, or its application? For example, should we
adopt a ``substantially the same proposal'' standard?
(ii) Momentum Requirement for Proposals Addressing Substantially the
Same Subject Matter as Those Previously Voted on Three or More Times in
the Preceding Five Calendar Years
    In addition to raising the resubmission thresholds to 5, 15, and 25
percent, we are proposing to amend Rule 14a-8(i)(12) to allow companies
to exclude proposals dealing with substantially the same subject matter
as proposals previously voted on by shareholders three or more times in
the preceding five calendar years that would not otherwise be
excludable under the 25 percent threshold if (i) the most recently
voted on proposal received less than a majority of the votes cast and
(ii) support declined by 10 percent or more compared to the immediately
preceding shareholder vote on the matter (the ``Momentum
Requirement''). For example, under such a requirement, a proposal would
be excludable where proposals dealing with substantially the same
subject matter had previously been voted on three times in the
preceding five calendar years and received 26 percent of the votes cast
on the third submission compared to 30 percent on the second
submission. In this case, the percentage of votes cast on the third
submission (26 percent) declined by more than 10 percent compared to
the percentage of votes cast on the second submission (30 percent) and,
thus, proposals dealing with substantially the same subject matter
would be excludable during the relevant lookback period.
    The purpose of this requirement would be to relieve management and
shareholders from having to repeatedly consider, and bear the costs
related to, matters for which shareholder interest has declined. We
note that it would apply only to matters that have been previously
voted on three or more times in the preceding five years, giving
shareholder-proponents a number of years to advocate for, and the
broader shareholder base ample opportunity to consider, the matters
raised. We further believe that a 10 percent decline in the percentage
of votes cast may demonstrate a sufficiently significant decline in
shareholder interest to warrant a cooling-off period. Nevertheless, we
seek comment on whether 10 percent is an appropriate figure, or whether
some other method or figure would be more appropriate, to gauge
shareholder interest.
    The Momentum Requirement would not apply where the previously voted
on proposal(s) received a majority of the votes cast at the time of the
most recent shareholder vote, even if shareholder support had declined
by 10 percent or more compared to the immediately preceding vote.\126\
We believe proposals that receive a majority of the votes cast have
demonstrated a sufficient level of shareholder interest to qualify for
resubmission. In addition, it is our understanding that companies
frequently act on proposals, including non-binding proposals, that
receive a majority of the votes cast, which can reduce the likelihood
of resubmitted proposals.
---------------------------------------------------------------------------

    \126\ If, after receiving a majority of the votes cast, a matter
receives less than a majority of the votes cast upon a subsequent
submission, the Momentum Requirement would apply. We believe that
the same rationale underlying the Momentum Requirement applies where
shareholder support declines below a majority of the votes cast, but
we seek comment on this point.
---------------------------------------------------------------------------

Request for Comment
    45. Should we adopt the Momentum Requirement, as proposed? If so,
should we adopt this requirement instead of, rather than in addition
to, the proposed resubmission thresholds? Would this requirement be
difficult to apply in practice?
    46. As proposed, a proposal that receives a majority of the votes
cast at the time of the most recent shareholder vote would not be
subject to the Momentum Requirement. Is there a voting threshold below
a majority of the votes cast that demonstrates a sufficient level of
shareholder interest in the matter to warrant resubmission regardless
of whether future proposals addressing substantially the same subject
matter gain additional shareholder support? If so, what is an
appropriate threshold?
    47. As proposed, a proposal that receives a majority of the votes
cast at

the time of the most recent vote would not be excludable under the
Momentum Requirement. Should this exception to the Momentum Requirement
be limited to the most recent shareholder vote, or should it apply to a
different lookback period such as three years or five years?
    48. Should the Momentum Requirement apply to all resubmitted
proposals, not just those that have been resubmitted three or more
times? For example, assuming adoption of the proposed resubmission
thresholds, should a proposal be excludable if proposals addressing
substantially the same subject matter received 19 percent on the first
submission and 16 percent on the second submission, even though 16
percent exceeds the relevant proposed threshold of 15 percent for a
second submission?
    49. Does a 10 percent decline in the percentage of votes cast
demonstrate a sufficiently significant decline in shareholder interest
to warrant a cooling-off period for any proposal receiving less than
majority support? Would a different percentage--such as 20, 30, or 50
percent--or an alternative threshold, be more appropriate?
    50. Should the cooling-off period for proposals that fail the
Momentum Requirement be shorter than the cooling-off period for
proposals that fail to satisfy the existing resubmission thresholds? If
so, what would be an appropriate cooling-off period?
    51. Are there other mechanisms we should consider that would
demonstrate that a proposal has lost momentum? For example, should
there be a separate basis for exclusion if the level of support has not
increased by more than 10 percent in the last two votes in the previous
five years? Or, should there be a separate basis for exclusion if the
level of support does not reach 50 percent within 10 years of first
being proposed? If so, what would be an appropriate cooling-off period?

III. General Request for Comment

    We request and encourage any interested person to submit comments
on any aspect of our proposals, other matters that might have an impact
on the proposed amendments, and any suggestions for additional changes.
With respect to any comments, we note that they are of greatest
assistance to our rulemaking initiative if accompanied by supporting
data and analysis of the issues addressed in those comments and by
alternatives to our proposals where appropriate.

IV. Economic Analysis

A. Introduction

    We are proposing to amend certain procedural requirements and the
provision relating to resubmitted proposals under the shareholder-
proposal rule. We are sensitive to the economic effects that may result
from the proposed rule amendments, including the benefits, costs, and
the effects on efficiency, competition, and capital formation. Section
3(f) of the Exchange Act, Section 2(b) of the Securities Act of 1933,
and Section 2(c) of the Investment Company Act require us, when
engaging in rulemaking that requires us to consider or determine
whether an action is necessary or appropriate in (or, with respect to
the Investment Company Act, consistent with) the public interest, to
consider, in addition to the protection of investors, whether the
action will promote efficiency, competition, and capital formation.
Additionally, Section 23(a)(2) of the Exchange Act requires us, when
making rules or regulations under the Exchange Act, to consider, among
other matters, the impact that any such rule or regulation would have
on competition and states that the Commission shall not adopt any such
rule or regulation which would impose a burden on competition that is
not necessary or appropriate in furtherance of the Exchange Act.
    We discuss the potential effects of the proposed rule amendments as
well as possible alternatives to the proposed amendments below. Where
possible, we have attempted to quantify the costs, benefits, and
effects on efficiency, competition, and capital formation expected to
result from the proposed rule amendments. In some cases, however, we
are unable to quantify the economic effects because we lack the
information necessary to provide a reasonable and reliable estimate.
Where we are unable to quantify the economic effects of the proposed
rule, we provide a qualitative assessment of the potential effects and
encourage commenters to provide data and information that would help
quantify the benefits, costs, and the potential impacts of the proposed
rule amendments on efficiency, competition, and capital formation.

B. Economic Baseline

    The baseline against which the costs, benefits, and the impact on
efficiency, competition, and capital formation of the proposed rule
amendments are measured consists of the current regulatory framework
and the current practices for shareholder proposal submissions.
1. Current Regulatory Framework
    State laws, corporate bylaws, and federal securities laws jointly
govern the shareholder-proposal process. Under state law, a shareholder
generally has the right to appear in person at an annual or special
meeting and put forth a resolution to be voted on by the shareholders.
Such resolutions can include, for example, proposals to adopt, amend,
or repeal bylaws or to request the board to take certain actions. State
law also governs shareholders' ability to submit a proposal through a
representative.\127\ Company bylaws can limit shareholders' ability to
attend or present at shareholder meetings. Federal securities law
governs communications in advance of shareholder meetings, including
solicitation of proxies for items to be voted on at the meeting.
Federal securities law also requires companies to allow shareholders to
vote by proxy at shareholder meetings and requires companies to include
a shareholder's proposal in the company's proxy statement unless a
ground for exclusion is met. Most shareholders currently vote in
advance of shareholder meetings through the proxy process.
---------------------------------------------------------------------------

    \127\ See supra Section II.B.
---------------------------------------------------------------------------

    Rule 14a-8 addresses when a company must include a shareholder
proposal in its proxy statement at an annual or special meeting of
shareholders.\128\ Rule 14a-8 also sets forth procedural and
substantive bases upon which a company can exclude a shareholder
proposal from its proxy statement. Under Rule 14a-8(b), to be eligible
to submit a proposal, a proponent ``must have continuously held at
least $2,000 in market value, or 1%, of the company's securities
entitled to be voted on the proposal at the meeting for at least one
year by the date [the proponent] submit[s] the proposal.'' The
Commission currently allows investors to aggregate their securities
with other investors to meet the applicable minimum ownership
thresholds to submit a Rule 14a-8 proposal. The rule does not currently
require a shareholder-proponent to provide information specific to the
use of a representative in the shareholder-proposal process, or state
when he or she is able to meet with the company to discuss the
proposal.
---------------------------------------------------------------------------

    \128\ A shareholder may alternatively solicit proxies by filing
its own proxy statement that complies with the federal proxy rules.
---------------------------------------------------------------------------

    Rule 14a-8(c) provides that a shareholder may submit no more than

one proposal to a company for a particular shareholders' meeting.
    Rule 14a-8(i)(12) allows companies to exclude a shareholder
proposal that ``deals with substantially the same subject matter as
another proposal or proposals that has or have been previously included
in the company's proxy materials within the preceding 5 calendar
years'' if the matter was voted on at least once in the last three
years and did not receive: (i) 3 percent of the vote if previously
voted on once; (ii) 6 percent of the vote if previously voted on twice;
or (iii) 10 percent of the vote if previously voted on three or more
times.
2. Affected Entities
    The proposed amendments to Rule 14a-8(b), Rule 14a-8(c), and Rule
14a-8(i)(12) could affect all companies subject to the federal proxy
rules that receive shareholder proposals, the proponents of these
proposals, and other non-proponent shareholders of these
companies.\129\ Companies that have a class of equity securities
registered under Section 12 of the Exchange Act are subject to the
federal proxy rules, including Rule 14a-8.\130\ In addition, there are
certain registered companies that voluntarily file proxy materials.
Finally, Rule 20a-1 under the Investment Company Act subjects all
management companies to the federal proxy rules.\131\
---------------------------------------------------------------------------

    \129\ The proposed amendments could also have second-order
effects on providers of administrative and advisory services related
to proxy solicitation and shareholder voting.
    \130\ We are not aware of any asset-backed issuers that have a
class of equity securities registered under Section 12 of the
Exchange Act. Most asset-backed issuers report pursuant to under
Section 15(d) of the Exchange Act and thus are not subject to the
federal proxy rules. Nine asset-backed issuers had a class of debt
securities registered under Section 12 of the Exchange Act as of
December 2018. As a result, these asset-backed issuers are not
subject to the federal proxy rules.
    Foreign private issuers are exempt from the federal proxy rules
under Rule 3a12-3(b) of the Exchange Act. 17 CFR 240.3a12-3(b).
    \131\ Rule 20a-1 of the Investment Company Act requires
management companies to comply with regulations adopted pursuant to
Section 14(a) of the Exchange Act that would be applicable to a
proxy solicitation if it were made in respect of a security
registered pursuant to Section 12 of the Exchange Act. See 17 CFR
270.20a-1.
    ``Management company'' means any investment company other than a
face-amount certificate company or a unit investment trust. See 15
U.S.C. 80a-4.
---------------------------------------------------------------------------

    As of December 31, 2018, there were 5,746 companies that had a
class of securities registered under Section 12 of the Exchange Act
(including 98 Business Development Companies (``BDCs'')).\132\ As of
the same date, there were 120 companies that did not have a class of
securities registered under Section 12 of the Exchange Act that
voluntarily filed proxy materials.\133\ As of August 31, 2019, there
were 12,718 management companies that were subject to the federal proxy
rules: (i) 12,040 open-end funds, out of which 1,910 were Exchange
Traded Funds (``ETFs'') registered as open-end funds or open-end funds
that had an ETF share class; (ii) 664 closed-end funds; and (iii) 14
variable annuity separate accounts registered as management investment
companies.\134\ The summation of these estimates yields 18,584
companies where there is a possibility of being affected by the
proposed rule amendments.\135\
---------------------------------------------------------------------------

    \132\ We estimate the number of companies with a class of
securities registered under Section 12 of the Exchange Act by
reviewing all Forms 10-K filed during calendar year 2018 with the
Commission and counting the number of unique companies that identify
themselves as having a class of securities registered under Section
12(b) or Section 12(g) of the Exchange Act. Foreign private issuers
that filed Forms 20-F and 40-F and asset-backed issuers that filed
Forms 10-D and 10-D/A during calendar year 2018 with the Commission
are excluded from this estimate. See supra note 130.
    BDCs are all entities that have been issued an 814-reporting
number. Our estimate includes BDCs that may be delinquent or have
filed extensions for their filings, and it excludes 6 wholly owned
subsidiaries of other BDCs.
    \133\ We identify registered companies that voluntarily file
proxy materials as companies reporting pursuant to Section 15(d) of
the Exchange Act but not registered under Section 12(b) or Section
12(g) of the Exchange Act that filed any proxy materials during
calendar year 2018 with the Commission. The proxy materials we
consider in our analysis are Forms DEF14A, DEF14C, DEFA14A, DEFC14A,
DEFM14A, DEFM14C, DEFR14A, DEFR14C, DFAN14A, N-14, PRE 14A, PRE 14C,
PREC14A, PREM14A, PREM14C, PRER14A and PRER14C. Form N-14 can be a
registration statement and/or proxy statement. We manually review
all Forms N-14 filed during calendar year 2018 with the Commission
and we exclude from our estimates Forms N-14 that are exclusively
registration statements.
    To identify companies reporting pursuant to Section 15(d) but
not registered under Section 12(b) or Section 12(g) of the Exchange
Act, we review all Forms 10-K filed in calendar year 2018 with the
Commission and count the number of unique companies that identify
themselves as reporting pursuant to Section 15(d) of the Exchange
Act and not registered under Section 12(b) or Section 12(g) of the
Exchange Act.
    \134\ We estimate the number of unique management companies by
reviewing all Forms N-CEN filed between June 2018 and August 2019
with the Commission. Open-end funds are series of trusts registered
on Form N-1A. Closed-end funds are trusts registered on Form N-2.
Variable annuity separate accounts registered as management
companies are trusts registered on Form N-3.
    The number of potentially affected Section 12 and Section 15(d)
reporting companies is estimated over a different time period (i.e.,
January 2018 to December 2018) than the number of potentially
affected management companies (i.e., June 2018 to August 2019)
because there is no complete N-CEN data for the most recent full
calendar year (i.e., 2018). Management companies started submitting
Form N-CEN in September 2018 for the period ended on June 30, 2018
with the Commission.
    \135\ 18,584 = 5,746 companies with a class of securities
registered under Section 12 of the Exchange Act + 120 companies
without a class of securities registered under Section 12 of the
Exchange Act that voluntarily filed proxy materials + 12,718
management companies.
---------------------------------------------------------------------------

    The above mentioned estimates are an upper bound of the number of
potentially affected entities because a substantial portion of these
entities would not be expected to file proxy materials or receive a
shareholder proposal in a given year. Out of the 18,584 potentially
affected entities mentioned above, 5,690 filed proxy materials with the
Commission during calendar year 2018.\136\ Out of the 5,690 companies,
4,758 (84%) were Section 12 or Section 15(d) reporting companies and
the remaining 932 (16%) were management companies.\137\
---------------------------------------------------------------------------

    \136\ See supra note 133 for details on the estimation of
companies that filed proxy materials with the Commission during
calendar year 2018.
    \137\ According to data from Forms N-CEN filed with the
Commission between June 2018 and August 2019, there were 965
management companies that submitted matters for its security
holders' vote during the reporting period: (i) 729 open-end funds,
out of which 86 were ETFs registered as open-end funds or open-end
funds that had an ETF share class; (ii) 235 closed-end funds; and
(iii) one variable annuity separate account (see Form N-CEN Item
B.10). The discrepancy in the estimated number of management
companies using proxy filings (i.e., 932) and Form N-CEN data (i.e.,
965) likely is attributable to the different time periods over which
the two statistics are estimated.

---------------------------------------------------------------------------

    Proponents of shareholder proposals also could be affected by the
proposed rule amendments. We estimate that there were 170 proponents--
38 individual proponents and 132 institutional proponents--that
submitted a shareholder proposal that was included in a proxy statement
and was subsequently voted on as lead proponent or co-proponent during
calendar year 2018.\138\
---------------------------------------------------------------------------

    \138\ Data is retrieved from proxy statements (see infra note
182). See infra Section IV.C.2.i for a discussion of limitations of
the proxy statement data.
    We also estimate that there were 278 proponents that submitted a
voted, omitted, or withdrawn proposal as lead proponent or co-
proponent during calendar year 2018. Data is retrieved from ISS
Analytics. See infra Section IV.B.3.i for a discussion of
limitations of the ISS Analytics data.
---------------------------------------------------------------------------

    Non-proponent shareholders of companies also could be affected by
the proposed rule amendments. As broad context, we note that the ratio
of the number of estimated proponents whose proposals appeared in proxy
statements during 2018 (170) to the number of direct and indirect
investors in companies subject to the proxy rules is extremely small.
According to a recent study based on the 2016 Survey of Consumer
Finances, approximately 65 million households owned stocks directly or
indirectly (through other investment instruments).\139\ Our analysis of
institutional investor data also shows that there were 4,558 unique
institutional investors during 2018.\140\ The ratio is roughly three
proponent shareholders per million investors.
---------------------------------------------------------------------------

    \139\ See Jesse Bricker et al., Changes in U.S. Family Finances
from 2013 to 2016: Evidence from the Survey of Consumer Finances,
103 Fed. Res. Bull., Sept. 2017, at 20, 39, available at https://www.federalreserve.gov/publications/files/scf17.pdf (51.9% of the
126.0 million families represented owned stocks). This is a
triennial survey, and the latest data available as of this time is
from the 2016 survey.
    Based on industry data provided by a proxy services provider, we
estimate that there were 22.2 million retail accounts that directly
held shares of U.S. public companies during calendar year 2017. The
number of retail accounts is an approximation of the number of
retail investors because each retail investor can hold multiple
accounts and multiple retail investors can hold a single account.
Further, the data covers a subset of all retail accounts (i.e.,
approximately 80% of all retail accounts).
    \140\ Data is retrieved from the Thomson Reuters Institutional
(13f) Holdings dataset. Unique institutional investors are the
unique Manager Numbers that filed a Form 13F at least for one
quarter during calendar year 2018 with the Commission. The estimated
number of institutional investors is a lower bound of the actual
number of institutional investors because only institutional
investors that exercise discretion over $100 million or more in
Section 13(f) securities must file Form 13F with the Commission.
---------------------------------------------------------------------------

3. Current Practices

i. General Discussion
    In this section, we provide descriptive statistics on shareholder
proposals to understand the baseline against which we compare the
effects of the proposed amendments, informing the analysis of the
potential effects of the proposed amendments to Rule 14a-8 in later
sections. In particular, we provide descriptive statistics on all
proposals and descriptive statistics by proposal outcome over time
(i.e., voted, omitted, and withdrawn proposals). We provide these
statistics to understand how the number of proposals has changed over
time, including because, from the perspective of a company, the costs
and benefits of a shareholder proposal may vary with the outcome of the
proposal.
    Similarly, we provide descriptive statistics by the type of company
that receives the proposal (i.e., large versus small companies), by
proposal topic (i.e., governance, environmental, and social proposals),
and by proponent type (i.e., institutions versus individuals). These
factors are relevant to our analysis of the proposed amendments to the
ownership and resubmission thresholds because the economic effects of
the proposed amendments may depend on company size, proposal topic, and
proponent type.\141\ Further, we provide descriptive statistics on the
concentration of proposals to better understand how the proposal
submission is distributed across the various proponents.\142\
---------------------------------------------------------------------------

    \141\ These statistics are also relevant in light of commenters'
concerns that the proposed amendments may affect certain proposals
and proponents differently. See, e.g., letter in response to the
Proxy Process Roundtable from Shareholder Rights Group dated October
25, 2019.
    \142\ These statistics are also relevant in light of commenters'
concerns that a few shareholders submit the majority of the
proposals. See infra note 166.
---------------------------------------------------------------------------

    Finally, we provide descriptive statistics on the voting support
and the probability of obtaining majority support for all proposals, by
proposal topic, and by proponent type. This analysis allows us to
provide some evidence on the effects of the proposed amendments on
proposals that may garner high and/or majority shareholder support, and
to examine whether the proposed amendments to the resubmission
thresholds may have larger effects for some types of proposals and
proponents than for others.
    To understand current and historical practices for shareholder
proposals, we study a sample of submitted shareholder proposals to
Russell 3000 companies that were either (i) included in companies'
proxy statements; (ii) identified by companies for exclusion through
the SEC staff no-action process (whether ultimately voted on by
shareholders, excluded by the company, or withdrawn by the proponent);
or (iii) submitted by the proponents (based on information provided by
the proponents) but never appeared on the company's proxy
statement.\143\ The study of a sample of submitted shareholder
proposals allows us to establish a baseline against which we will
compare effects of the proposed amendments. Figure 1 shows the number
of shareholder proposals submitted to Russell 3000 companies between
1997 and 2018. The dashed line in Figure 1 shows the number of
submitted shareholder proposals between 1997 and 2003, and the solid
line shows the number of submitted proposals from 2004 to 2018. Data on
submitted proposals prior to 2004 is incomplete. Hence, our economic
analysis focuses on shareholder proposals submitted between 2004 and
2018. Nevertheless, to provide an understanding of longer term trends
in the number of submitted proposals, we use data prior to 2004 for the
purposes of Figure 1 only.
---------------------------------------------------------------------------

    \143\ Unless stated otherwise, all data in this section is
retrieved from ISS Analytics. ISS Analytics identifies proposals
that were withdrawn based on whether the proponent had submitted a
withdrawal letter to the company as part of the no-action process,
or whether the proponent had informed ISS or otherwise made known
(for example, through its website) that it had withdrawn the
proposal. To the extent that a proponent did not submit a withdrawal
letter to the company or did not inform ISS Analytics or otherwise
make known that it had withdrawn the proposal, our sample may not
include all withdrawn proposals.
    We exclude from our analysis shareholder proposals related to
proxy contests for the election of directors because these proposals
are usually included in shareholders' (as opposed to companies')
proxy statements and thus are not subject to Rule 14a-8.
---------------------------------------------------------------------------

    Between 1997 and 2018, shareholders submitted a total of 20,804
proposals to Russell 3000 companies. Out of the 20,804 proposals,
14,860 were submitted in the 2004 to 2018 period. Shareholders
submitted 831 proposals to Russell 3000 companies in 2018, representing
a 4 percent decrease relative to the number of shareholder proposals
submitted in 2017. As Figure 1 shows, the number of submitted
shareholder proposals has fluctuated from a low of 745 in 2001 to a
high of 1,136 in 2008, with an average of 946 submitted shareholder
proposals between 1997 and 2018. Our analysis shows no discernible
trend in the number of submitted shareholder proposals in the 1997 to
2018 period.\144\
---------------------------------------------------------------------------

    \144\ In this and all subsequent analyses, to examine if there
is a statistically significant time trend in the data, we regress
the variable of interest to a year trend variable, and we test
whether the coefficient on the trend variable is statistically
different from zero. We use a two-tailed t-test and a 90% confidence
interval. See, e.g., William H. Greene, Econometric Analysis (6th
ed. 2007) (``Greene (2007)'').
    The p-value on the trend variable is equal to 0.35.

---------------------------------------------------------------------------

[GRAPHIC] [TIFF OMITTED] TP04DE19.006

    Figure 2 shows the percentage of voted, omitted, and withdrawn
shareholder proposals for Russell 3000 companies between 2004 and 2018.
We study the percentage of voted, omitted, and withdrawn proposals
separately because each of these categories of proposals may impose
different burdens on--and also provide different benefits to--companies
and their shareholders. Voted proposals are those that went to a
shareholder vote. Omitted proposals are those that were omitted
following an issuance of a no-action letter by Commission staff.\145\
Withdrawn proposals are primarily those that the proponent voluntarily
withdrew after reaching an agreement with management or without
reaching an agreement.\146\
---------------------------------------------------------------------------

    \145\ A proposal may be omitted without a no-action letter from
the Commission staff. In particular, a company may give notice to
the Commission that it will exclude the proposal or give notice to
the Commission that it plans to exclude the proposal and seek relief
from a court. Those proposals likely are captured in the withdrawn
proposals category in our ISS Analytics dataset because ISS
Analytics only classifies proposals for which the Commission staff
has issued a no-action letter as omitted proposals.
    \146\ We classify as ``withdrawn'' proposals that: (i) Were
withdrawn by the proponent (3,292 or 76.8% of all withdrawn
proposals); (ii) were not found in the company's proxy materials and
for which it is yet to be determined whether they were withdrawn or
omitted (802 or 18.7% of all withdrawn proposals); (iii) were on the
ballot but never came to a vote because the proponent did not appear
at the meeting to present the proposal (120 or 2.8% of all withdrawn
proposals); (iv) the proponent indicated it intended to submit but
that were never actually submitted (52 or 1.2% of all withdrawn
proposals); (v) were not voted on because the meeting was cancelled,
usually due to a merger, acquisition, bankruptcy, or calling of a
special meeting (18 or 0.4% of all withdrawn proposals); and (vi)
were not voted on because the meeting was postponed, usually due to
a merger, acquisition, bankruptcy, or calling of a special meeting
(4 or 0.1% of all withdrawn proposals). The above mentioned proposal
categories are available through ISS Analytics.
---------------------------------------------------------------------------

    As Figure 2 shows, out of all proposals submitted to Russell 3000
companies between 2004 and 2018, 56 percent went to a shareholder vote,
15 percent were omitted following a no-action letter issued by
Commission staff, and 29 percent were withdrawn. The percentage of
voted, omitted, and withdrawn proposals has largely remained stable
during our sample period.\147\
---------------------------------------------------------------------------

    \147\ Untabulated analysis shows no statistically significant
trend in the number of voted, omitted, and withdrawn proposals over
time (p-values are equal to 0.93, 0.37, and 0.34, respectively).

---------------------------------------------------------------------------

[GRAPHIC] [TIFF OMITTED] TP04DE19.007

    Out of the 831 proposals submitted in 2018, 447 were voted, 123
were omitted, and 261 were withdrawn.\148\ The proposed rule amendments
would enhance disclosure requirements for proposals submitted through a
representative. To understand how frequently proposals are submitted
through a representative, we manually collect information on the
identity of the proponents and representatives from the proxy
statements, and we estimate that from the 447 voted proposals submitted
for inclusion in a company's proxy materials for 2018 shareholder
meetings, 363 provided some information related to the identity of the
proponents, out of which 67 (or 18% = 67/363) were submitted by a
representative.\149\
---------------------------------------------------------------------------

    \148\ A few proposals were submitted to companies outside of the
Russell 3000 index. Using FactSet's corporate governance database,
SharkRepellent (available at https://sharkrepellent.net), we
estimate that in 2018, there were 19 voted shareholder proposals at
11 companies outside of the Russel 3000 index. Our analysis focuses
on proposals submitted to companies within the Russell 3000 index
because this sample represents the vast majority of submitted
shareholder proposals.
    \149\ We potentially underestimate the percentage of proposals
submitted by a representative because companies might provide
information on the identity of the proponent but might not mention
that the proposal was submitted via a representative in the proxy
statement.
---------------------------------------------------------------------------

    In all subsequent analysis in this section (except for the analysis
that relates to voting support), we examine all submitted proposals
(rather than focusing on just one of voted, omitted, or withdrawn
proposals) to determine the potential impact of the proposed amendments
because Rule 14a-8 applies to all submitted proposals.
    Next, we compare the average number of proposals submitted to large
and small companies because the frequency of submitted proposals, and
thus the effects of the proposed amendments, may vary with company
size. In particular, Figure 3 compares the average number of proposals
submitted to large companies relative to our universe of companies
(i.e., Russell 3000 companies). Large companies are represented by the
S&P 500 constituents.\150\ As Figure 3 shows, S&P 500 companies (i.e.,
solid line in Figure 3) received on average 1.56 proposals each year,
and Russell 3000 companies (i.e., dashed line in Figure 3) received on
average 0.33 proposals each year during our sample period. The average
number of proposals submitted to S&P 500 companies is statistically
significantly higher than the average number of proposals submitted to
Russell 3000 companies during our sample period.\151\ The average
number of proposals submitted to S&P 500 companies has decreased from
1.85 in 2004 to 1.24 in 2018, representing a 33 percent decrease during
our sample period, and the average number of proposals submitted to
Russell 3000 companies has decreased from 0.38 in 2004 to 0.28 in 2018,
representing a 26 percent decrease during our sample period.\152\
Results are qualitatively similar when we compare voted rather than all
submitted shareholder proposals for S&P 500 and Russell 3000
companies.\153\
---------------------------------------------------------------------------

    \150\ The median market capitalization of Russell 3000
constituents was $1.7 billion as of May 10, 2019 and the median
market capitalization of S&P 500 constituents was $22 billion as of
August 30, 2019. See Market Capitalization Ranges, FTSE Russell
Market, https://www.ftserussell.com/research-insights/russell-reconstitution/market-capitalization-ranges (last visited Sept. 23,
2019); S&P 500, S&P Dow Jones Indices, https://us.spindices.com/indices/equity/sp-500 (last visited Sept. 23, 2019).
    We retrieve data on whether a proposal was submitted to an S&P
500 and/or a Russell 3000 company from ISS Analytics.
    The ISS Analytics data only covers Russell 3000 companies. S&P
500 companies usually are a subset of the Russell 3000 companies. To
the extent that some S&P 500 companies are not part of the Russell
3000 index, our analysis underestimates the average number of
proposals submitted to S&P 500 companies, because those proposals
are missing from our data.
    \151\ In this and all subsequent analysis, we use a two-tailed
t-test and a 90% confidence interval to compare differences in means
across groups.
    The p-value is equal to zero.
    \152\ Untabulated analysis shows a statistically significant
downward trend in the average number of proposals submitted to S&P
500 and Russell 3000 companies during our sample period (p-values
are equal to zero).
    \153\ Untabulated analysis shows that the average number of
voted proposals for S&P 500 companies has decreased from 0.99 in
2004 to 0.70 in 2018, representing a 29% decrease during our sample
period, and the average number of voted proposals for Russell 3000
companies has decreased from 0.20 in 2004 to 0.15 in 2018,
representing a 26% decrease during our sample period.
---------------------------------------------------------------------------

    Overall, our analysis shows that larger companies receive more
proposals than smaller companies, and the number of proposals received
by both large and small companies has decreased over time.

[GRAPHIC] [TIFF OMITTED] TP04DE19.008

    We also examine the frequency of submitted proposals by proposal
topic because the effects of the proposed amendments may vary by
proposal topic. More specifically, the effects of the proposed
amendments to the resubmission thresholds may vary by proposal topic
because the topic of a proposal may be related to the voting support of
a proposal as well as the time it may take for a proposal to garner
majority support. However, we also recognize that the garnering of
support over time may be the result of a variety of factors other than
or in addition to the continued inclusion of the proposal in the proxy.
In addition, the effects of the proposed amendments to the ownership
thresholds may vary by proposal topic to the extent that the proposed
amendments have a disproportionate effect on different types of
proponents and the type of proposal varies by proponent type.
    Figure 4 shows the percentage of all submitted shareholder
proposals by proposal topic over time. ISS Analytics classifies
proposals into three categories: Governance, environmental, and social
proposals.\154\ The results of any analysis that involves
classification of proposals into various categories should be
interpreted with caution for various reasons, including because there
is a level of subjectivity involved in the classification of the
proposals to the various categories. For example, proposals on board
diversity could be considered either governance or social proposals. In
addition, each proposal category includes a wide range of proposals.
For example, governance proposals can include proposals related to
executive compensation as well as proposals related to the sale of
company assets.
---------------------------------------------------------------------------

    \154\ We retrieve data on the topic of the shareholder proposal
from ISS Analytics. In this dataset, proposals are classified in
three categories: Governance, environmental, and social. Governance
proposals include, among others, proposals related to audits, board
issues, compensation, voting, proxy matters, and shareholder
meetings. Environmental proposals include, among others, proposals
related to sustainability, greenhouse gas emissions, climate change,
community/environmental impact, and renewable energy. Social
proposals include, among others, proposals related to political
contributions, sexual orientation, political lobbying disclosure,
human rights, and board diversity. We manually classify 250
proposals with missing shareholder proposal topics into one of the
three above-mentioned topics by reviewing the description of the
shareholder proposal in the ISS Analytics dataset. We do not
reclassify other proposals in the ISS Analytics dataset to ensure
the replicability of our analysis. We exclude from this analysis 33
proposals with missing shareholder proposal topics and missing
descriptions of the shareholder proposal because we lack the
necessary information to classify these proposals into one of the
three above-mentioned categories.
---------------------------------------------------------------------------

    Our analysis shows that, during our sample period, 59 percent of
the submitted shareholder proposals (i.e., 8,829 proposals) regarded
governance issues, 11 percent (i.e., 1,601 proposals) regarded
environmental issues, and 30 percent (i.e., 4,397 proposals) regarded
social issues. The percentage of governance proposals relative to all
submitted proposals has decreased from 70 percent in 2004 to 44 percent
in 2018, with a corresponding increase in the percentage of
environmental proposals from 5 percent in 2004 to 16 percent in 2018
and an increase in the percentage of social proposals from 25 percent
in 2004 to 39 percent in 2018.\155\ Results are qualitatively similar
when we examine voted (rather than submitted) shareholder proposals by
topic.\156\
---------------------------------------------------------------------------

    \155\ Untabulated analysis shows a statistically significant
downward trend in the percentage of governance proposals (p-value is
equal to zero) and a statistically significant upward trend in the
percentage of environmental and social proposals over time (p-values
are equal to zero).
    \156\ Untabulated analysis shows that the percentage of voted
governance proposals relative to all voted proposals has decreased
from 69% in 2004 to 62% in 2018, with a corresponding increase in
the percentage of voted environmental proposals from 3% in 2004 to
11% in 2018, and a small decrease in the percentage of voted social
proposals from 28% in 2004 to 27% in 2018.
---------------------------------------------------------------------------

    Overall, our analysis shows an increase in the frequency of social
and environmental proposals and a decrease in the frequency of
governance proposals during our sample period.

[GRAPHIC] [TIFF OMITTED] TP04DE19.009

    Next, we analyze the frequency of submitted proposals by proponent
type because the effects of the proposed amendments may vary with the
type of proponent. This is because the level and duration of holdings,
as well as chosen proposal topics, may vary with proponent type. Figure
5 shows the percentage of submitted shareholder proposals by proponent
type over time. We classify proponents into three categories:
Individuals, institutions, and unknown.\157\ As Figure 5 shows, the
average percentage of proposals submitted by individuals (i.e., gray-
shaded area in Figure 5) was 31 percent during our sample period, and
it ranged from a low of 26 percent in 2011 to a high of 39 percent in
2018. Further, as Figure 5 shows, the average percentage of proposals
submitted by institutions (i.e., line-patterned area in Figure 5) was
67 percent during our sample period, and it ranged from a low of 59
percent in 2018 to a high of 71 percent in 2011. Our analysis shows no
significant time-series trends in the percentage of proposals submitted
by individuals and institutions.\158\ Institutions submitted
approximately twice the number of proposals submitted by individuals,
and the difference in the number of proposals submitted by institutions
and individuals was statistically significant.\159\ The percentage of
proposals with missing proponent information (i.e., black-shaded area
in Figure 5) has decreased from 6 percent in 2004 to 2 percent in 2018,
but this decrease is statistically insignificant.\160\ Our results are
qualitatively similar when we examine the percentage of voted rather
than submitted shareholder proposals by proponent type over time.\161\
---------------------------------------------------------------------------

    \157\ We retrieve data on proponent types from ISS Analytics.
Whenever there are multiple proponents submitting a proposal, the
proponent type corresponds to the type of the lead proponent.
Whenever the proponent type is missing, we manually classify the
proponent into one of the three categories (i.e., individual,
institution, or unknown) using the proponent name. Individual
proponents are all retail investors. Institutional proponents
comprise: (i) Asset managers (25% of all institutional proposals);
(ii) unions (25% of all institutional proposals); (iii) pension
funds (20% of all institutional proposals); (iv) religious
organizations (12% of all institutional proposals); (v) nonprofit
organizations (11% of all institutional proposals); and (vi) others
(8% of all institutional proposals). An institutional proponent is
classified as ``other'' whenever the proponent does not fall into
any of the other institutional proponent categories. ``Unknown''
proponents are those with missing identities. The identity of the
proponent presumably is missing in the ISS Analytics dataset because
companies are not required to disclose the identity of the proponent
in the proxy statements. See 17 CFR 240.14a-8(l) (Rule 14a-8(l)).
    \158\ The p-values are equal to 0.19 and 0.64, respectively.
    \159\ The p-value is equal to zero.
    \160\ Untabulated analysis shows a statistically significant
downward trend in the percentage of proposals submitted by
proponents with missing identity over time (the p-value is equal to
0.17).
    \161\ The average percentage of voted proposals that were
submitted by individuals was 32% during our sample period, and it
ranged from a low of 25% in 2011 to a high of 49% in 2018. The
average percentage of voted proposals that were submitted by
institutions was 64% during our sample period, and it ranged from a
low of 48% in 2018 to a high of 71% in 2011.
---------------------------------------------------------------------------

    Overall, our analysis shows that institutions submitted proposals
more frequently than individuals, and the percentage of proposals
submitted by institutions and individuals has not changed significantly
during our sample period.

[GRAPHIC] [TIFF OMITTED] TP04DE19.010

    We also study the number of unique proponents and average number of
proposals submitted by each proponent to shed some light on the
concentration of shareholder proposals across proponents. Figures 6A,
6B, and 6C show the number of unique proponents (i.e., gray bars) and
the average number of proposals submitted by each proponent over time
(i.e., black line) for all proponents, for proponents that are
individuals, and for proponents that are institutions, respectively.
For this analysis, we count separately proposals submitted by
proponents and proposals submitted by co-proponents. We exclude
proposals with missing proponent identity. To avoid over-counting the
number of unique proponents and undercounting the average number of
proposals submitted by each proponent, we review and manually correct
the proponent names whenever ISS Analytics uses variations of the same
name for a proponent (e.g., ``CalPERS'' and ``California Public
Employees' Retirement System''). Nevertheless, to the extent that the
same proponent appears with a slightly different name in our dataset,
our analysis potentially overestimates the number of unique proponents
and underestimates the average number of proposals submitted by each
proponent.
    As Figure 6A shows, the average number of unique proponents was 228
during our sample period, and it ranged from a low of 181 in 2011 to a
high of 286 in 2004. The average number of proposals submitted by each
proponent was 4.9 during our sample period, and it ranged from a low of
3.9 in 2004 to a high of 6.7 in 2015. Untabulated analysis shows no
time-series trends in the number of unique proponents and the average
number of proposals submitted by each proponent during our sample
period.\162\
---------------------------------------------------------------------------

    \162\ The p-values are equal to 0.84 and 0.45, respectively.
---------------------------------------------------------------------------

    A different picture emerges when splitting the observations into
proposals submitted by individuals (Figure 6B) and institutions (Figure
6C).\163\ As Figure 6B shows, the average number of unique proponents
that were individuals was 90 during our sample period, and it ranged
from a low of 64 in 2012 to a high of 155 in 2004. The average number
of proposals submitted by each individual proponent was 3.9 during our
sample period, and it ranged from a low of 2.3 in 2004 to a high of 5.2
in 2017. Untabulated analysis shows a statistically significant
downward trend in the number of unique individual proponents and a
statistically significant upward trend in the average number of
proposals submitted by each individual proponent.\164\
---------------------------------------------------------------------------

    \163\ For proposals that are submitted through a representative,
when classifying proponents into institutions and individuals, ISS
takes into account the identity of the shareholder rather than the
identity of the representative that submitted the proposal.
    \164\ The p-values are equal to zero.
---------------------------------------------------------------------------

    As Figure 6C shows, the average number of unique proponents that
were institutions was 143 during our sample period, and it ranged from
a low of 107 in 2006 to a high of 207 in 2017. The average number of
proposals submitted by each institutional proponent was 5.7 during our
sample period, and it ranged from a low of 3.7 in 2017 to a high of 7.6
in 2007. Untabulated analysis shows a statistically significant upward
trend in the number of unique institutional proponents and a
statistically significant downward trend in the average number of
proposals submitted by each institutional proponent.\165\
---------------------------------------------------------------------------

    \165\ The p-values are equal to zero and 0.04, respectively.
---------------------------------------------------------------------------

    Overall, the results of our analysis suggest that there has been an
increase (decrease) in the concentration of proposals submitted by
individuals (institutions) during our sample period.
BILLING CODE 8011-01-P

[GRAPHIC] [TIFF OMITTED] TP04DE19.011

[GRAPHIC] [TIFF OMITTED] TP04DE19.012

[GRAPHIC] [TIFF OMITTED] TP04DE19.013

BILLING CODE 8011-01-C
    Relatedly, an academic study, using a sample of shareholder
proposals submitted to S&P 1500 companies between 2003 and 2014, shows
that five individual proponents submitted 78 percent of all proposals
submitted by individuals and 27 percent of all proposals submitted by
all proponents.\166\
---------------------------------------------------------------------------

    \166\ Nickolay Gantchev & Mariassunta Giannetti, The Costs and
Benefits of Shareholder Democracy 8-9, 37 (European Corporate
Governance Institute, Working Paper No. 586/2018, 2018) (``Gantchev
& Giannetti (2018)''). 27% = (290 + 222 + 157 + 133 + 125)/3,384.
These statistics are estimated using the identity of the proponents
rather than the identity of the representatives, in cases where a
representative submitted a proposal on behalf of a proponent.
    For related statistics, see letters in response to the Proxy
Process Roundtable from U.S. Chamber of Commerce Center for Capital
Markets Competitiveness dated November 12, 2018, at 11 (``[D]uring
2017, just three individuals . . . sponsored 25% of proposals
submitted at the Fortune 250.''); Ceres dated November 13, 2018, at
6 (``From 2004-2017, the Chevedden, Steiner, and McRitchie families
submitted 14.5% of the 11,706 proposals filed.''); Mercy Investment
Services, Inc. dated December 3, 2018, at 2 (same); Investment
Company Institute dated November 14, 2018, at 1-3 of attachment.
---------------------------------------------------------------------------

    Finally, we examine voting outcomes for all proposals, by proposal
topic, and by proponent type to inform analysis of the effects of the
proposed amendments on proposals that may garner high shareholder
support. In addition, the level of voting support may determine which
shareholder proposals would be affected by the proposed amendments to
Rule 14a-8(i)(12). Figures 7A, 7B, and 7C show the average voting
support for all proposals, by proposal topic, and by type of proponent,
respectively. Voting support is defined as the ratio of ``for'' votes
divided by the sum of ``for'' and ``against'' votes.\167\ As Figure 7A
shows, the average voting support was 33 percent in 2018, and it ranged
from a low of 27.8 percent in 2004 to a high of 37.5 percent in 2009,
with an average of 33.4 percent during our sample period.\168\
---------------------------------------------------------------------------

    \167\ We define voting support as the ratio of ``for'' divided
by the sum of ``for'' and ``against'' votes because this is how
voting support is defined for the purposes of Rule 14a-8(i)(12). See
supra note 116. Abstentions and broker non-votes are excluded from
the calculation of voting support for the purposes of Rule 14a-
8(i)(12). See supra note 116.
    \168\ Untabulated analysis shows no statistically significant
trend in the average voting support for all proposals during our
sample period (the p-value is equal to 0.40).
---------------------------------------------------------------------------

    As Figure 7B shows, the average voting support for governance
proposals (i.e., solid line in Figure 7B) has remained stable during
our sample period at an average of 42.1 percent, while there has been
an upward trend in the average voting support for environmental and
social proposals (i.e., dotted and dashed lines in Figure 7B).\169\ In
particular, the average voting support for environmental proposals
increased from a low of 11.8 percent in 2004 to a high of 28.9 percent
in 2018, with an average of 21.9 percent during our sample period. The
average voting support for social proposals increased from a low of 9.3
percent in 2005 to a high of 24.6 percent in 2018, with an average of
17.4 percent during our sample period. Untabulated analysis also shows
that the average voting support for governance proposals is
statistically significantly higher than the average voting support for
environmental and social proposals, and the average voting support for
environmental proposals is statistically significantly higher than the
average voting support for social proposals.\170\
---------------------------------------------------------------------------

    \169\ Untabulated analysis shows a statistically significant
upward trend in the average voting support for environmental and
social proposals (p-values are equal to zero) and no statistically
significant trend in the average voting support for governance
proposals during our sample period (the p-value is equal to 0.83).
    \170\ The p-values are equal to zero.
---------------------------------------------------------------------------

    Finally, as Figure 7C shows, the average voting support for
proposals submitted by institutions (i.e., solid line) has remained
stable during our sample period at an average of 35.4 percent during
our sample period, and the average voting support submitted by
individuals (i.e., dashed line) has remained stable during our sample
period at an average of 32.2 percent.\171\ Untabulated analysis also
shows that the average voting support for proposals submitted by
institutions is statistically significantly higher than the average
voting support for proposals submitted by individuals.\172\
---------------------------------------------------------------------------

    \171\ Untabulated analysis shows no statistically significant
trend in the average voting support for proposals submitted by
institutions and individuals during our sample period. The p-values
are equal to zero 0.22 and 0.97 respectively.
    \172\ The p-value is equal to 0.01.
---------------------------------------------------------------------------

    In sum, our analysis shows that the average voting support of all
proposals has remained stable during our sample period, but there is an
increase in the average voting support for environmental and social
proposals over the sample period.
BILLING CODE 8011-01-P

[GRAPHIC] [TIFF OMITTED] TP04DE19.014

[GRAPHIC] [TIFF OMITTED] TP04DE19.015

[GRAPHIC] [TIFF OMITTED] TP04DE19.016

BILLING CODE 8011-01-C
    Figures 8A, 8B, and 8C show the percentage of proposals that
received majority support for all proposals, by proposal topic, and by
proponent type, respectively. Majority support is defined as more than
50 percent of the ``for'' votes divided by the sum of ``for'' and
``against'' votes.\173\ We examine the percentage of proposals that
received majority support as opposed to some other voting threshold
because studies show that the probability of implementation of a
shareholder proposal increases significantly once the proposal receives
majority support.\174\
---------------------------------------------------------------------------

    \173\ See supra note 167.
    \174\ For example, a 2010 study by Ertimur et al. shows that
``proposals that won at least one majority vote in the past are more
likely to be implemented (34.2% versus 22.9%).'' See Yonca Ertimur,
Fabrizio Ferri, & Stephen R. Stubben, Board of Directors'
Responsiveness to Shareholders: Evidence from Shareholder Proposals,
16 J. Corp. Fin. 53 (2010) (``Ertimur et al. (2010)''). Similarly, a
2017 study by Bach and Metzger showed that ``when the 50%-threshold
is passed, there is a very sizeable jump of about 20% of the
implementation likelihood.'' See Laurent Bach & Daniel Metzger, How
Do Shareholder Proposals Create Value? (Working Paper, Mar. 2017)
(``Bach & Metzger (2017)''). However, only crossing the management-
defined majority threshold (as opposed to the simple majority
threshold defined as the ratio of ``for'' votes divided by the sum
of ``for'' and ``against'' votes) has an effect of the probability
that the proposal is implemented. Id. The management-defined
majority threshold may differ from a simple majority threshold. Id.
In 43% of their sample, the management threshold is the same as the
simple majority threshold. See id. In our analysis, we define
majority support as the simple majority threshold because we lack
data on the management-defined majority threshold.
---------------------------------------------------------------------------

    As Figure 8A shows, there is a statistically significant downward
trend in the percentage of proposals that received majority support
during our sample period.\175\ In particular, the percentage of
proposals that received majority support ranged from a high of 27.7
percent in 2009 to a low of 11.9 percent in 2018, with an average of
20.6 percent during our sample period.
---------------------------------------------------------------------------

    \175\ The p-value is equal to zero.
---------------------------------------------------------------------------

    As Figure 8B shows, few environmental and social proposals received
majority support during our sample period, while one out of three
governance proposals received majority support.\176\ More specifically,
the percentage of governance proposals that received majority support
(i.e., solid line in Figure 8B) ranged from a high of 37.7 percent in
2009 to a low of 14.9 percent in 2018, with an average of 30.6 percent
during our sample period. The percentage of environmental proposals
that received majority support (i.e., dotted line in Figure 8B) ranged
from a low of 0 percent in 2004 to a high of 16.3 percent in 2018, with
an average of 2.6 percent during our sample period. The percentage of
social proposals that received majority support (i.e., dashed line in
Figure 8B) ranged from a low of zero percent in 2010 to a high of 4.5
percent in 2016, with an average of 1.8 percent during our sample
period. Untabulated analysis shows that there is a statistically
significant downward trend in the percentage of governance proposals
that received majority support, and a statistically significant upward
trend in the percentage of environmental and social proposals that
received majority support during our sample period.\177\ Interpretation
of these results should be undertaken with caution due to various
factors, including the uncertainties inherent in categorization and the
evolution of voting support for proposals over time.
---------------------------------------------------------------------------

    \176\ Untabulated analysis shows that the percentage of
governance proposals that received majority support is statistically
significantly higher than the percentage of environmental and social
proposals that received majority support (the p-values are equal to
zero), and the percentage of environmental proposals that received
majority support is not statistically significantly different than
the percentage of social proposals that received majority support
(the p-value is equal to 0.23).
    \177\ The p-values are equal to 0.01, 0.02, and 0.05,
respectively.
---------------------------------------------------------------------------

    As Figure 8C shows, there is a statistically significant downward
trend in the percentage of proposals submitted by individuals that
received majority support, while the percentage of proposals submitted
by institutions that received majority support has not changed
significantly during our sample period.\178\ In particular, the
percentage of proposals submitted by individuals that received majority
support (i.e., dashed line in Figure 8C) ranged from a high of 35
percent in 2009 to a low of 12.3 percent in 2014, with an average of
23.7 percent during our sample period. In addition, the percentage of
proposals submitted by institutions that received majority support
(i.e., solid line in Figure 8C) ranged from a high of 24.3 percent in
2013 to a low of 11.1 percent in 2018, with an average of 18.7 percent
during our sample period. The percentage of proposals submitted by
individuals that received majority support is statistically
significantly higher than the percentage of proposals

submitted by institutions that received majority support.\179\
---------------------------------------------------------------------------

    \178\ The p-values are equal to zero and 0.48, respectively.
    \179\ The p-value is equal to 0.02.
---------------------------------------------------------------------------

    In sum, our analysis shows that there is a decrease in the number
of proposals that received majority support during our sample period
and this decrease is primarily attributable to governance proposals and
proposals submitted by individuals.
BILLING CODE 8011-01-P
[GRAPHIC] [TIFF OMITTED] TP04DE19.017

[GRAPHIC] [TIFF OMITTED] TP04DE19.018

[GRAPHIC] [TIFF OMITTED] TP04DE19.019

BILLING CODE 8011-01-C
    Because many proposals are non-binding, not all proposals that
garner majority support are implemented. Using a sample of governance-
related proposals for S&P 1500 companies between 1997 and 2011,
previous studies have shown that between 31 percent and 56 percent of
the shareholder proposals that received majority support were
implemented by management, and this percentage has increased over
time.\180\ These studies have also shown that the probability of a
proposal being implemented depends on the influence of the proponent,
the type of proposal, the past performance of the company, and whether
voting support exceeds majority support as defined by a company's
governing documents.\181\
---------------------------------------------------------------------------

    \180\ Bach and Metzger use a sample of governance-related
proposals for S&P 1500 companies between 1997 and 2011 and find that
56% of the proposals that received majority support were implemented
by management, and this percentage increased from 29% in 1997 to 70%
in 2011. Bach & Metzger (2017), supra note 174. Ertimur et al. use a
sample of governance-related proposals for S&P 1500 companies
between 1997 and 2004 and find that 31% of the proposals that
received majority support were implemented by management, and this
percentage increased from 16% in 1997 to 40% in 2004. Ertimur et al.
(2010), supra note 174. The differences in the statistics of the two
cited papers is likely due to the different definition of
implemented proposals. Bach and Metzger consider a proposal to be
implemented ``if management adopts the content of the proposal
within two years after the shareholder meeting,'' while Ertimur et
al. consider a proposal to be implemented if ``the board takes a
significant step toward a partial or full implementation within one
year from the majority vote.'' See Bach & Metzger (2017), supra note
174; Ertimur et al. (2010), supra note 174. A 2007 study by Thomas
and Cotter provide similar rates of implementation of shareholder
proposals that received majority support as Ertimur et al. (2010).
See Randall S. Thomas & James F. Cotter, Shareholder Proposals in
the New Millennium: Shareholder Support, Board Response, and Market
Reaction, 13 J. Corp. Fin. 368 (``Thomas & Cotter (2007)'').
    \181\ See Thomas & Cotter (2007), supra note 180; Ertimur et al.
(2010), supra note 174; Bach & Metzger (2017), supra note 174.
---------------------------------------------------------------------------

ii. Discussion Specific to Proposed Amendments to Rule 14a-8(b) and
Rule 14a-8(c)
    To provide insight into the distribution of ownership across
proponents, we perform two sets of analysis. First, we review
proponents' ownership information as disclosed in companies' proxy
statements for proposals to be considered at shareholder meetings held
in 2018.\182\ Companies have discretion in the type of information they
must include in the proxy statements regarding proponents.\183\ In
particular, the company's proxy statement must either include the name
and address of the proponents as well as the number of the voting
securities that the proponent holds, or alternatively, a statement that
this information will be provided to shareholders upon request.
Whenever the company discloses the identity of the proponents, the
company may disclose the identity of all or a subset of the proponents.
Whenever the company discloses proponents' ownership information, the
company may disclose the actual dollar value, the actual number of
shares, a minimum dollar value, or a minimum number of shares held by
the proponent. In addition, whenever the company discloses proponents'
ownership information, the company may disclose ownership information
for a subset of the proponents submitting a proposal, and the company
may disclose actual holdings information for some of the proponents and
minimum holdings information for the rest of the proponents submitting
the same proposal. The type of ownership information the company
discloses (i.e., actual holdings versus minimum holdings and dollar
value versus number of shares) frequently depends on the type of
information provided in the proof-of-ownership letter furnished by the
proponent. In particular, proponents also have discretion in the type
of information they must provide in the proof-of-ownership
letters.\184\ Proponents may disclose the exact duration and level of
their holdings or they may confirm that they meet the minimum ownership
thresholds. For these reasons, data on proponent ownership from proxy
statements may not be representative of the overall distribution of
proponent ownership.
---------------------------------------------------------------------------

    \182\ Proxy statements filed with the Commission are available
at https://www.sec.gov/edgar/searchedgar/companysearch.html.
    \183\ See Rule 14a-8(l).
    \184\ See Rule 14a-8(b).
---------------------------------------------------------------------------

    Table 1 summarizes the distribution of proponents' ownership in our
sample of proposals.\185\ There were 447 unique voted proposals for
shareholder meetings held in 2018. Out of the 447 proposals, 287, or 64
percent, contained information on proponents' actual and/or minimum
holdings, whereas the remaining 160, or 36 percent, did not

contain information on proponents' ownership. In our sample of proxy
statements, there were 198 proponents that submitted 150 unique
proposals for which the proxy statements mentioned the proponents'
actual holdings, and 159 proponents that submitted 139 unique proposals
for which the proxy statements mentioned the proponents' minimum
holdings.\186\
---------------------------------------------------------------------------

    \185\ There is some information on proponents' duration of
ownership in only 5 out of the 447 reviewed proposals. Because the
sample is small, we do not provide descriptive statistics on
proponents' duration of ownership using information from the proxy
statements.
    \186\ Multiple proponents may submit a single proposal. Hence,
the number of proponents in Table 1 can be higher than the number of
proposals. Also, for the same reason, within each panel, the sum of
proposals for the various ownership ranges can be higher than the
total number of proposals. For example, in the Actual Holdings
panel, the sum of proposals for the various ownership ranges (i.e.,
158 = 2 + 75 + 16 + 65) is higher than the total number of proposals
in the panel (i.e., 150).
    Further, companies may disclose information on actual holdings
for some proponents and information on minimum holdings for other
proponents submitting the same proposal. Hence, in Table 1, the sum
of the proposals with (i) information on proponents' actual holdings
(i.e., 150 proposals); (ii) information on proponents' minimum
holdings (i.e., 139 proposals); and (iii) no information on
proponents' holdings (i.e., 160 proposals) is higher than the number
of unique proposals in our sample (i.e., 447).
    The proxy statements provide information on the identity of the
proponents for a subset of the proposals with no holdings
information.
---------------------------------------------------------------------------

    From the 198 proponents with actual holdings information, (i) 3
proponents, or 2 percent, held less than $2,000 worth of shares, and
those proponents submitted 2 unique proposals; (ii) 85 proponents, or
43 percent, held more than or equal to $2,000 but less than $15,000
worth of shares, and those proponents submitted 75 unique proposals;
(iii) 16 proponents, or 8 percent, held more than or equal to $15,000
but less than $25,000 worth of shares, and those proponents submitted
16 unique proposals; and (iv) 94 proponents, or 47 percent, held more
than or equal to $25,000 worth of shares, and those proponents
submitted 65 unique proposals.\187\ The median ownership for proponents
with actual holdings information was $16,758 and the average ownership
was $17.4 million.\188\
---------------------------------------------------------------------------

    \187\ In cases where the company reports the number of shares
rather than the dollar amount of the proponent's holdings, we
convert the number of shares to dollars using the average of the bid
and ask prices during a 60-day period before the filing date of the
proxy statement. We use the filing date of the proxy statement
rather than the date that the proponent submitted the proposal (see
supra note 57) because proxy statements do not report the date of
the shareholder proposal submission. Stock prices are retrieved from
CRSP.
    \188\ In untabulated analysis, we examine whether the
probability that a proposal would receive majority support depends
on the proponents' ownership level. To measure voting support, we
use the ISS Analytics data for the sample of proposals that were
voted on in 2018 shareholder meetings. We only use data on
proponents with information on their exact holdings. We compare the
probability that the proposal would receive majority support for
proposals submitted by proponents with above and below median dollar
ownership levels and we find a negative and statistically
significant relation between the probability that a proposal would
receive majority support and the level of proponents' ownership (p-
value equal to 0.06), but we find no relation between the level of
the voting support and the level of proponents' ownership (p-value
equal to 0.14). The results of this analysis should be interpreted
with caution because of the small sample used for this analysis.
---------------------------------------------------------------------------

    From the 159 proponents with minimum holdings information, (i) all
of the proponents held at least $2,000 worth of shares, and those
proponents submitted 139 unique proposals; (ii) 23 proponents, or 14
percent, held at least $15,000 worth of shares, and those proponents
submitted 23 unique proposals; and (iv) 16 proponents, or 10 percent,
held at least $25,000 worth of shares, and those proponents submitted
16 unique proposals.
    As mentioned above, in our sample, there were three proponents
(i.e., one percent of all proponents with ownership information), whose
individual holdings were below the current $2,000 ownership threshold,
and those proponents submitted two unique proposals (i.e., one percent
of all proposals submitted by proponents with ownership information in
the proxy statements). For one of the two proposals, there were two co-
proponents, whose both aggregate and individual holdings did not meet
the $2,000 current ownership threshold.\189\ For the other of the two
proposals, there were four co-proponents, whose aggregate holdings met
the $2,000 current threshold and the individual holdings of one of the
co-proponents did not meet the $2,000 current ownership threshold.
---------------------------------------------------------------------------

    \189\ The dollar value of proponents' ownership may be measured
with error in cases where we use the filing date of the proxy
statement to estimate the dollar value of proponents' ownership (see
supra note 187). Hence, the aggregate holdings of the proponents
that submitted the abovementioned proposal may be higher than or
equal to $2,000.
---------------------------------------------------------------------------

    Further, in our sample, two entities submitted more than one
proposal, directly or indirectly, to a company for a particular
shareholders' meeting. In particular, one entity submitted two
proposals to one company and another entity submitted two proposals to
each one of six different companies, resulting in a total of 14
submitted proposals.

         Table 1--Proponents' Ownership (From Proxy Statements)
------------------------------------------------------------------------
                                             Number of       Number of
                                            proponents       proposals
------------------------------------------------------------------------
Actual Holdings.........................             198             150
    Holdings <$2,000....................               3               2
    Holdings >=$2,000, but <$15,000.....              85              75
    Holdings >=$15,000, but <$25,000....              16              16
    Holdings >=$25,000..................              94              65
Minimum Holdings........................             159             139
    Holdings >$0........................             159             139
    Holdings >=$2,000...................             159             139
    Holdings >=$15,000..................              23              23
    Holdings >=$25,000..................              16              16
No Holdings Information.................             156             160
------------------------------------------------------------------------
Sources: CRSP, ISS Analytics, Proxy Statements from EDGAR.

    Second, we review proponents' ownership information from the proof-
of-ownership letters submitted in connection with the proposal that can
be found as an attachment to the Commission staff's no-action letters
issued under Rule 14a-8 during calendar year 2018.\190\ Our sample
comprises 254 unique shareholder

proposals submitted by 242 unique proponents, yielding 485 proponent-
proposal pairs. For 433, or 89 percent of all proponents that submitted
a proposal for which the company submitted a no-action request, there
is information on proponents' actual and/or minimum holdings. For the
remaining 52 proponents, or 11 percent, there is no information on
proponents' actual or minimum holdings. Further, there are 284
proponents that submitted 155 unique proposals, for whom there is
information on their actual holdings, and 149 proponents that submitted
99 unique proposals, for whom there is only information on proponents'
minimum holdings.\191\
---------------------------------------------------------------------------

    \190\ The no-action letters that include the proof-of-ownership
letters are available at https://www.sec.gov/divisions/corpfin/cf-noaction/2019_14a-8.shtml and https://www.sec.gov/investment/investment-management-no-action-letters#P87_900. We analyze a sample
(rather than the universe) of all proof-of-ownership letters
attached to no-action letters available on the Commission's website
because ownership data in proof-of-ownership letters are
unstructured, and thus information must be manually collected.
    \191\ Multiple proponents may submit a single proposal. Hence,
the number of proponents in Table 2 can be higher than the number of
proposals. Also, for the same reason, within each panel, the sum of
proposals for the various ownership ranges can be higher than the
total number of proposals in the corresponding panel. For example,
in the Actual Holdings panel, the sum of proposals for the various
ownership ranges (i.e., 199 = 6 + 98 + 16 + 79) is higher than the
total number of proposals in the panel (i.e., 155).
    In Table 2, the sum of the proposals with (i) information on
proponents' actual holdings (i.e., 155 proposals); (ii) information
on proponents' minimum holdings (i.e., 99 proposals); and (iii) no
information on proponents' holdings (i.e., 34 proposals) is higher
than the number of unique proposals in our sample (i.e., 254)
because for the same proposal, the proof-of-ownership letters
submitted by the proponents can provide information on proponents'
actual and/or minimum holdings.
---------------------------------------------------------------------------

    From the 284 proponents with actual holdings information, (i) eight
proponents, or three percent, held less than $2,000 worth of shares,
and those proponents submitted six unique proposals; (ii) 140
proponents, or 49 percent, held more than or equal to $2,000 but less
than $15,000 worth of shares, and those proponents submitted 98 unique
proposals; (iii) 19 proponents, or seven percent, held more than or
equal to $15,000 but less than $25,000 worth of shares, and those
proponents submitted 16 unique proposals; and (iv) 117 proponents, or
41 percent, held more than or equal to $25,000 worth of shares, and
those proponents submitted 79 unique proposals.\192\ The median
ownership for proponents with actual holdings information is $13,076,
and the average ownership is $11.8 million.
---------------------------------------------------------------------------

    \192\ Data on proponent ownership from proof-of-ownership
letters may not be representative of the overall distribution of
proponent ownership because companies do not seek to omit every
shareholder proposal. Companies sought to omit proposals by
requesting a no-action letter from the Commission staff for 31% of
shareholder proposals during the calendar year 2018. The percentage
of proposals that companies sought to omit in 2018 is estimated as
the number of unique proposals for which the Commission received a
no-action request in 2018--see supra note 190--divided by the number
of all unique proposals (i.e., voted, omitted, and withdrawn
proposals) to be considered in 2018 shareholder meetings from ISS
Analytics. Hence, this percentage is an approximation of the actual
percentage of proposals that companies sought to omit in 2018
because some of the no-action requests received by the Commission in
2018 regarded 2019 shareholder meetings.
    In addition, data on proponent ownership from proof-of-ownership
letters is limited because proponents are not required to disclose
in the proof-of-ownership letter their exact stock ownership but
only to confirm that they meet the minimum ownership thresholds. See
Rule 14a-8(b).
    In cases where the proponent reports the number of shares rather
than the dollar amount of his/her holdings, we convert the number of
shares to dollars using the average of the bid and ask prices during
the 60 calendar days before the date the shareholder submitted the
proposal. See supra note 57. In cases where the no-action letter
does not contain the date that the proposal was mailed or emailed,
we use the date that the company received the proposal to estimate
the highest of the average of the bid and ask prices during a 60-day
period. In cases where the no-action letter does not contain the
date that the proposal was mailed or emailed or the date that the
company received the proposal, we use the date that the proposal was
signed by the proponent. Stock prices are retrieved from CRSP.
---------------------------------------------------------------------------

    From the 149 proponents with minimum holdings information, (i) 148
proponents, or 99 percent, hold at least $2,000 worth of shares, and
those proponents submitted 98 unique proposals; (ii) 18 proponents, or
12 percent, hold at least $15,000 worth of shares, and those proponents
submitted 18 unique proposals; and (iii) 12 proponents, or eight
percent, hold at least $25,000 worth of shares, and those proponents
submitted 12 unique proposals.
    As Table 2 shows, in our sample, there are nine proponents with
individual holdings below the current $2,000 ownership threshold (i.e.,
eight proponents with exact holdings information and one proponent with
minimum holdings information below the $2,000 threshold) and those
proponents submitted seven unique proposals. For one of the seven
proposals, there were two co-proponents, whose aggregate holdings met
the $2,000 current ownership threshold. For another one of the seven
proposals, there was only one proponent whose holdings did not meet the
$2,000 threshold.\193\ For the remaining five proposals, there was at
least one other co-proponent whose share ownership met the current
$2,000 threshold.
---------------------------------------------------------------------------

    \193\ Commission staff issued a no-action letter for this
proposal following the company's request because the proponent did
not satisfy the minimum ownership requirement under Rule 14a-8(b).

    Table 2--Proponents' Ownership (From Proof-of-Ownership Letters)
------------------------------------------------------------------------
                                             Number of       Number of
                                            proponents       proposals
------------------------------------------------------------------------
Actual Holdings.........................             284             155
    Holdings <$2,000....................               8               6
    Holdings >=$2,000, but <$15,000.....             140              98
    Holdings >=$15,000, but <$25,000....              19              16
Holdings >=$25,000......................             117              79
Minimum Holdings........................             149              99
    Holdings <$2,000....................             149              99
    Holdings >=$2,000...................             148              98
    Holdings >=$15,000..................              18              18
    Holdings >=$25,000..................              12              12
No Holdings Information.................              52              34
------------------------------------------------------------------------
Sources: CRSP, Proof-of-Ownership Letters attached to no-action letters
  found on Commission's website.

    Data on proponent ownership from proxy statements and proof-of-
ownership letters cannot inform the analysis of shareholder-proponents'
duration of holdings in excess of one year.\194\ One commenter has
provided an estimate of average holding period of four to eight months
across all types of

shareholders.\195\ We solicit public comment on the duration of
ownership for all shareholders, and specifically for shareholders
likely to submit shareholder proposals, in Section IV.E below.
---------------------------------------------------------------------------

    \194\ See supra note 185 and accompanying text. Because under
current eligibility requirements, shareholder-proponents are
required to have held shares for at least one year, we can
reasonably assume a minimum of one year ownership duration for
proponents' reported holdings unless the proposal was challenged on
the basis of not satisfying the ownership eligibility requirements.
    \195\ See letter in response to the Proxy Process Roundtable
from the Shareholder Rights Group dated December 4, 2018, at 9
(noting ``[t]he average time an investor held a share holding a
stock [sic] in the 1960s when the rule was passed was eight years,
today it is between four and eight months'').
    There is limited academic research on share ownership duration,
primarily due to data limitations. Some studies infer average
duration of holdings for all shareholders (rather than just
proponents) from data on aggregate share trading volumes. In
particular, one white paper has looked at share turnover for NYSE
listed securities to estimate an average duration of holdings of
less than two years in 2014. See Michael W. Roberge et al.,
Lengthening the Investment Time Horizon (2016), available at https://www.pionline.com/article/20161101/WHITE_PAPERS/161109903. Any such
analysis inferring average duration of holdings across all investors
masks potential heterogeneity of holding periods across different
types of investors. In particular, because some of the trading
volume may come from high-frequency traders, these average
statistics may underestimate the holding duration of institutional
and individual investors likely to submit shareholder proposals.
    Other academic research has relied on information on holdings
for specific types of shareholders. In particular, one strand of
literature has looked at daily trading records of 78,000 households
from January 1991 to December 1996 from a U.S. discount brokerage
house. A survey article notes that the estimated average holding
period for individuals in this sample is 16 months. See Brad M.
Barber & Terrance Odean, The Behavior of Individual Investors, 2
Handbook of the Economics of Finance, 1533, 1539 (2013). Another
paper finds that the median holding period of individual investors
in this dataset is 207 trading days. See Deniz Anginer, Snow Xue
Han, & Celim Yildizhan, Do Individual Investors Ignore Transaction
Costs? 6 (Working Paper, 2018), available at https://ssrn.com/abstract=2972845. Another strand of literature uses information from
13F filings with the Commission to estimate statistics of duration
of holdings for a subset of institutional investors. For example,
one paper documents that the value-weighted composition of long-term
institutional investors with securities holdings in public U.S.
companies has nearly doubled from approximately 35 percent since the
early 2000s to 65 percent in 2017. Long-term institutional investors
are defined as those with an implied average holding period of
longer than three years. See Wei Jiang, Who Are the Short-Termists?,
J. Applied Corp. Fin., Fall 2018, at 19 (2018). A second paper
documents a median duration of holdings of approximately two years
in 2015 among this set of investors. See K.J. Martijn Cremers &
Simone M. Sepe, Institutional Investors, Corporate Governance, and
Firm Value, 41 Seattle U.L. Rev. 387, 403 (2018).
    Lastly, we provide some evidence on holding periods using data
on reported sales of corporate stocks retrieved from individual tax
returns. See Janette Wilson & Pearson Liddell, Sales of Capital
Assets Data Reported on Individual Tax Returns, 2007-2012, IRS
Statistics of Income Bull., Winter 20167, at 58, available at
https://www.irs.gov/pub/irs-soi/soi-a-inca-id1604.pdf (Table 4B). In
2012 (the last year with available data), we estimate that among all
transactions with reported holding duration, 46% were for corporate
stocks held for a period longer than one year, 27% were for stocks
held longer than 2 years, and 18% were for stocks held longer than 3
years. Estimates of holdings duration from reported sales may not be
representative of the overall distribution of duration of
stockholdings because the propensity to sell a stock may be
dependent on the amount of time the stock has been held. See Zoran
Ivkovi[cacute], James Poterba, & Scott Weisbenner, Tax-Motivated
Trading by Individual Investors, 95 Amer. Econ. Rev. 1605 (2005).
---------------------------------------------------------------------------

iii. Discussion Specific to Proposals Submitted on Behalf of
Shareholders
    As mentioned in Section IV.B.3.i above, from the 447 proposals
submitted for a vote at a shareholder meeting in 2018, 363 provided
information related to the identity of the proponents. Out of those 363
proposals, 67 (or 18 percent) were submitted by a representative. The
documentation that would be mandated by the proposed amendments is
generally non-public. We are able to verify if the proponent provided
the documentation that would be mandated by the proposed amendments
only in cases where the company submitted a no-action request for the
proposal at issue, and thus submitted to the Commission the necessary
supporting documentation, including the shareholder proposal and
related disclosures. Companies submitted a no-action request for 12 out
of the 67 proposals submitted by a representative.\196\ In eight out of
the 12 requests, the proponent provided all documentation that would be
mandated by the proposed amendments. In the remaining four cases, the
shareholder proposal attached to the no-action letter posted on the
Commission's website was signed by the representative rather than the
proponent.
---------------------------------------------------------------------------

    \196\ See supra note 190 (providing links to no-action letters).
---------------------------------------------------------------------------

iv. Discussion Specific to Rule 14a-8(i)(12)
    To understand current practices for shareholder proposal
resubmissions, we study a sample of shareholder proposal resubmissions
for Russell 3000 companies from 2011 to 2018.\197\ Out of the 3,620
proposals that went to a vote between 2011 and 2018, 2,168 (60 percent)
were a first submission, 678 (19 percent) were a second submission, and
the remaining 774 (21 percent) were a third or higher submission (see
Table 3 below).\198\ During the same time period, the average support
for first time proposals was 34 percent and the median support was 30
percent. The average support for second and third or higher submissions
was slightly lower than first-time proposals, each receiving
approximately 30 percent and 32 percent, on average.\199\
---------------------------------------------------------------------------

    \197\ See CII Report, supra note 92. Because the CII Report does
not use data on shareholder proposal submissions prior to 2011, the
analysis in the report is conducted under the assumption that all
proposals submitted in the earlier years are first-time submissions.
Nevertheless, some proposals in the earlier years are actually
resubmissions from previous years. As a result, the CII Report
underestimates the number of resubmitted proposals in the sample and
overestimates the number of proposals eligible for resubmission in
the following year. To correct for these biases, we supplement data
in the CII Report with data on voted shareholder proposals from ISS
Analytics during the years 2006 to 2010. We apply the CII Report's
methodology to identify resubmitted proposals for years 2011 to 2013
using the description of the shareholder proposal in the ISS data.
As a result, we identify 1,442 shareholder proposals as
resubmissions compared to 1,314 in the CII Report. Therefore, some
of the statistics on resubmitted proposals in our analysis differ
from those presented in the CII Report.
    When considering eligibility for resubmission, we only consider
whether the proposal is eligible for resubmission in the following
year, and not whether the proposal is eligible for resubmission at
some other point in the future. This distinction is important
because, under the current resubmission thresholds, all proposals
are eligible for resubmission following a three-year cooling-off
period. Of all the proposals resubmitted during 2011 to 2018, 84%
were voted on in the previous year and 12% (5%) were not voted in
the previous year, but were voted on two (three) years prior.
    Statistics on resubmitted shareholder proposals are subject to
measurement error because ISS Analytics' classification of
resubmitted shareholder proposals is not always the same as what the
Commission's staff or courts might deem to be a proposal on
``substantially the same subject matter.''
    Lastly, the total number of voted shareholder proposals in the
CII Report is slightly lower than the counts in the ISS Analytics
data. For example, there are 423 shareholder proposals that appear
as first-time submissions or resubmissions in the CII Report during
2018, while we estimate that 447 shareholder proposals were voted on
during the same period using the ISS Analytics data. See supra
Section IV.B.3.i.
    \198\ A proposal is categorized as first submission if it has
not been voted on in the preceding three calendar years. A proposal
is categorized as second (third or greater) submission if it has
been voted on within the preceding three calendar years and it has
been voted on once (two or more times) in the past five calendar
years.
    \199\ Throughout the analysis in this section, when comparing
estimates across subsamples of the data (e.g., average support for
first time and second time proposals, or the propensity to resubmit
proposals across proposal types, etc.), we verify that the estimates
are statistically different from one another. In particular, we test
whether the difference in a particular pair of estimates is
statistically significant using hypothesis tests for continuous and
discrete random variables and a p-value of 10%. See, e.g., Greene
(2007), supra note 144.
    The median support for second-time submissions, 29 percent, was
slightly lower than first-time submissions, while the median support
for third-time or subsequent submissions, 31 percent, was slightly
higher. While the difference in median voting support between first-
time and second-time submissions is statistically significant, the
difference in the median voting support between first-time and third
or subsequent submissions is not.

                       Table 3--Shareholder Proposals by Number of Submissions, 2011-2018
----------------------------------------------------------------------------------------------------------------
                                                                                % of proposals
                                     Number of                       Average %       Median %      eligible for
                                     proposals    % of proposals      support         support      resubmission
                                                                                next year
----------------------------------------------------------------------------------------------------------------
First...........................           2,168              60              34              30              94
Second..........................             678              19              30              29              90
Third or subsequent.............             774              21              32              31              94
                                 -------------------------------------------------------------------------------
    Total.......................           3,620             100              32              30              93
----------------------------------------------------------------------------------------------------------------
Sources: CII Report, ISS Analytics.

    Some types of proposals are more likely to be resubmitted than
others and thus, the effect of proposed amendments to the resubmission
thresholds may vary with proposal type. Therefore, what follows is a
discussion of how the likelihood of shareholder proposal resubmission
is related to: (i) Prior voting support; (ii) proposal topic; (iii)
firm size; (iv) dual-class structure of shares; and (v) proponent type.
    Shareholders' propensity to resubmit previously voted proposals
depends on the voting support a proposal has previously received. Using
a sample of voted shareholder proposals from 2011 to 2018, we find that
a shareholder proposal was more likely to be resubmitted in the
following year if it has garnered greater than 10 percent, but less
than majority, support (see Table 4 below).\200\ In particular, among
proposals that were eligible to be resubmitted in the following year
under the current resubmission thresholds, 32 percent of proposals that
received less than 10 percent of votes in favor were actually
resubmitted in the following year, as compared to 44 percent of
proposals that received between 10 percent and 50 percent of votes in
favor. We assume that because shareholder proposals garnering majority
support are more likely to be implemented than those receiving lower
levels of support, these proposals are less likely to be
resubmitted.\201\
---------------------------------------------------------------------------

    \200\ For this analysis, we look at proposals submitted during
the calendar years 2011 to 2017 and whether they were resubmitted in
the following year using data from 2012 to 2018. Because we do not
have data on whether these proposals were resubmitted in 2019, we
exclude proposals submitted in 2018.
    The analysis shows that, in our sample, 10 shareholder proposals
submitted to nine companies were resubmitted and voted on despite
being eligible for exclusion under the current resubmission
thresholds. Five of these proposals were resubmitted in the year
following a previous vote during 2011 to 2017. Thus, these five
proposals are included in the results presented in Table 4.
    \201\ See supra note 180 and accompanying text.

              Table 4--Shareholder Proposals Support and Resubmissions by Proposal Topic, 2011-2017
----------------------------------------------------------------------------------------------------------------
                   % Vote for                          <10%           10%-50%          >=50%           Total
----------------------------------------------------------------------------------------------------------------
All Proposals:
    Number of proposals.........................             648           1,997             552           3,197
    Eligible for resubmission...................             418           1,997             552           2,967
        (% of proposals)........................           (65%)          (100%)          (100%)           (93%)
    Resubmitted.................................             133             878              65           1,076
        (% of eligible proposals)...............           (32%)           (44%)           (12%)           (36%)
Governance Proposals:
    Number of proposals.........................             176           1,196             522           1,894
    Eligible for resubmission...................             117           1,196             522           1,835
        (% of proposals)........................           (66%)          (100%)          (100%)           (97%)
    Resubmitted.................................              28             453              62             543
        (% of eligible proposals)...............           (24%)           (38%)           (12%)           (30%)
Environmental Proposals:
    Number of proposals.........................             152             301               9             462
    Eligible for resubmission...................             105             301               9             415
        (% of proposals)........................           (69%)          (100%)          (100%)           (90%)
    Resubmitted.................................              36             132               2             170
        (% of eligible proposals)...............           (34%)           (44%)           (22%)           (41%)
Social Proposals:
    Number of proposals.........................             320             500              21             841
    Eligible for resubmission...................             196             500              21             717
        (% of proposals)........................           (61%)          (100%)          (100%)           (85%)
    Resubmitted.................................              69             293               1             363
        (% of eligible proposals)...............           (35%)           (59%)            (5%)           (51%)
----------------------------------------------------------------------------------------------------------------
Sources: CII Report, ISS Analytics.

    The tendency to resubmit shareholder proposals differs by proposal
topic (see Table 4 above). Because governance-related shareholder
proposals received greater voting support than environmental and social
shareholder proposals, on average, governance-related proposals were
more likely to be eligible for resubmission in the following year.\202\
Despite more proposals being eligible for resubmission, governance-
related

proposals were less likely to be resubmitted than environmental and
social proposals. In particular, among proposals that received less
than 10 percent support, 24 percent of governance-related shareholder
proposals eligible for resubmission in the following year were actually
resubmitted, as compared to 34 percent of environmental and 35 percent
of social shareholder proposals eligible for resubmission. Among
proposals that received between 10 percent and 50 percent support, 38
percent of governance-related shareholder proposals eligible for
resubmission in the following year were actually resubmitted, as
compared to 44 percent of environmental and 59 percent of social
shareholder proposals eligible for resubmission.
---------------------------------------------------------------------------

    \202\ See Section IV.B.3.i for an analysis of voting support by
shareholder proposal topic. We rely on the proposal categorization
from the CII Report, supra note 92, to group proposals into
governance, environmental, and social categories.
---------------------------------------------------------------------------

    The tendency to resubmit shareholder proposals also differs by the
type of company. In particular shareholder proposals received by S&P
500 companies were more likely to be resubmitted in the following year
than shareholder proposals received by those companies not in the S&P
500 (see Table 5 below). For example, among shareholder proposals
receiving less than 10 percent support, 33 percent of eligible
shareholder proposals were resubmitted at S&P 500 companies, as
compared to 22 percent at non-S&P 500 companies. Among shareholder
proposals receiving between 10 percent and 50 percent support, 47
percent of eligible shareholder proposals were resubmitted at S&P 500
companies, as compared to 31 percent at non-S&P 500 companies.

               Table 5--Shareholder Proposals Support and Resubmissions by Company Size, 2011-2017
----------------------------------------------------------------------------------------------------------------
                   % Vote for                          <10%           10%-50%          >=50%           Total
----------------------------------------------------------------------------------------------------------------
S&P 500:
    Number of proposals.........................             556           1,663             337           2,556
    Eligible for resubmission...................             359           1,663             337           2,359
        (% of proposals)........................           (65%)          (100%)          (100%)           (92%)
    Resubmitted.................................             120             774              47             941
        (% of eligible proposals)...............           (33%)           (47%)           (14%)           (40%)
Non S&P 500:
    Number of proposals.........................              92             334             215             641
    Eligible for resubmission...................              59             334             215             608
        (% of proposals)........................           (64%)          (100%)          (100%)           (95%)
    Resubmitted.................................              13             104              18             135
        (% of eligible proposals)...............           (22%)           (31%)            (8%)           (22%)
----------------------------------------------------------------------------------------------------------------
Sources: CII Report, ISS Analytics.

    Fewer shareholder proposals were eligible for resubmission in the
following year in companies with dual-class shares as compared to those
without such shares (see Table 6 below).\203\ Among shareholder
proposals that received less than 10 percent in voting support, only 50
percent were eligible for resubmission the following year for companies
with dual-class shares, as compared to 66 percent for companies without
dual-class shares. However, eligible shareholder proposals at dual-
class companies were more likely to be resubmitted in the following
year. Among proposals eligible for resubmission in the following year,
71 percent were resubmitted at dual-class companies, while only 29
percent were resubmitted at non-dual class companies.
---------------------------------------------------------------------------

    \203\ To identify firms with two or more classes of common
shares, we use the classification of dual-class firms in the ISS
Governance dataset.

          Table 6--Shareholder Proposals Support and Resubmissions by Type of Company Shares, 2011-2017
----------------------------------------------------------------------------------------------------------------
                   % Vote for                          <10%           10%-50%          >=50%           Total
----------------------------------------------------------------------------------------------------------------
Companies with dual-class shares:
    Number of proposals.........................              48             116               4             168
    Eligible for resubmission...................              24             116               4             144
        (% of proposals)........................           (50%)          (100%)          (100%)           (86%)
    Resubmitted.................................              17              69               0              86
        (% of eligible proposals)...............           (71%)           (59%)            (0%)           (60%)
Companies without dual-class shares:
    Number of proposals.........................             600           1,881             548           3,029
    Eligible for resubmission...................             394           1,881             548           2,823
        (% of proposals)........................           (66%)          (100%)          (100%)           (93%)
    Resubmitted.................................             116             809              65             990
        (% of eligible proposals)...............           (29%)           (43%)           (12%)           (35%)
----------------------------------------------------------------------------------------------------------------
Sources: CII Report, ISS Analytics.

    The tendency to resubmit shareholder proposals also differs by the
type of proponent (see Table 7 below). In particular shareholder
proposals submitted by individual proponents receiving between 10
percent and 50 percent of the votes in support were less likely to be
resubmitted than proposals submitted by other proponent types.\204\
---------------------------------------------------------------------------

    \204\ Shareholder proposals with individual proponents were less
likely to be resubmitted than proposals with non-individual
proponents for all three proposal types: Governance-related,
environmental, and social. However, the difference is most
pronounced for social proposals, for which individuals were five
times less likely to resubmit eligible proposals.

            Table 7--Shareholder Proposals Support and Resubmissions by Type of Proponent, 2011-2017
----------------------------------------------------------------------------------------------------------------
                   % Vote for                          <10%           10%-50%          >=50%           Total
----------------------------------------------------------------------------------------------------------------
Individual proponents:
    Number of proposals.........................             171             725             182           1,078
    Eligible for resubmission...................              97             725             182           1,004
        (% of proposals)........................           (57%)          (100%)          (100%)           (93%)
    Resubmitted.................................              29             266              11             306
        (% of eligible proposals)...............           (30%)           (37%)            (6%)           (30%)
Non-individual proponents:
    Number of proposals.........................             477           1,272             370           2,119
    Eligible for resubmission...................             321           1,272             370           1,963
        (% of proposals)........................           (67%)          (100%)          (100%)           (93%)
    Resubmitted.................................             104             612              54             770
        (% of eligible proposals)...............           (32%)           (48%)           (15%)           (39%)
----------------------------------------------------------------------------------------------------------------
Sources: CII Report, ISS Analytics.

    We also analyze how voting support changes with the number of times
a particular proposal is submitted. Fifty-two percent of resubmitted
shareholder proposals saw an increase in voting support relative to the
last time they were voted on (see Table 8 below). Shareholder proposals
that got less than 10 percent voting support in the past were more
likely to see increases in voting support as compared to proposals
receiving between 10 percent and 50 percent of votes in favor. For
those proposals for which voting support increased, the average
increase in voting support is approximately six percent for all
proposals, six percent for governance-related proposals, and five
percent for environmental and social proposals.

                     Table 8--Change in Voting Support for Resubmitted Proposals, 2011-2018
----------------------------------------------------------------------------------------------------------------
                   % Vote for                          <10%           10%-50%          >=50%           Total
----------------------------------------------------------------------------------------------------------------
All Proposals:
    Number of proposals.........................             178           1,165             109     \205\ 1,452
    % Proposals with increase in voting.........             55%             52%             47%             52%
    Average increase in voting support..........              7%              5%              6%              6%
Governance Proposals:
    Number of proposals.........................              42             657             106             805
    % Proposals with increase in voting.........             52%             50%             48%             50%
    Average increase in voting support..........             17%              6%              6%              6%
Environmental Proposals:
    Number of proposals.........................              47             157               2             206
    % Proposals with increase in voting.........             62%             55%              0%             56%
    Average increase in voting support..........              4%              5%             N/A              5%
Social Proposals:
    Number of proposals.........................              89             351               1             441
    % Proposals with increase in voting.........             53%             54%              0%             53%
    Average increase in voting support..........              5%              5%             N/A              5%
----------------------------------------------------------------------------------------------------------------
Sources: CII Report, ISS Analytics.

    Lastly, we analyze the extent to which initial support for
shareholder proposals is related to the likelihood of the shareholder
proposal ultimately obtaining majority support.\206\ During 2011 to
2018, 533 unique shareholder proposals have garnered majority support,
of which 479 (90 percent) obtained majority support on their initial
submission.\207\ Of the remaining 54 shareholder proposals that
received majority support following a resubmission, 32 (60 percent)
obtained majority support on their second submission and 22 (40
percent) obtained majority support on their third or subsequent
submissions. Figure 9 below shows the distribution of first submission
voting support for the 54 shareholder proposals that garnered majority
support following a resubmission. Of these, approximately 60 percent
started with support of over 40 percent in their first submission, and
98 percent started with support of over 5 percent in their first
submission. Of the 22 proposals that obtained majority support on their
third or subsequent submissions, approximately 95 percent received
support of over 15 percent on their second submission, and 100 percent
received support of over 25 percent on their third or subsequent
submission.
---------------------------------------------------------------------------

    \205\ The total number of proposals in Table 8 represents the
total number of proposals that were resubmitted (not first time
submissions) in the years 2011 to 2018, which differs from the total
number of proposals in Tables 4, 5, 6, and 7 (i.e., 3,197
proposals). This is because the analysis on the propensity to
resubmit shareholder proposals excludes proposals resubmitted in
2011 and those that were resubmitted after a period longer than one
year. See supra note 200.
    \206\ Note that in this analysis, we may be underestimating the
likelihood of proposals ultimately obtaining majority support,
especially for proposals toward the end of our sample that could get
majority support following a future resubmission. For example, if a
new proposal fails to garner majority support in 2018, but is
resubmitted in 2019, our data does not allow us to see whether such
a proposal would garner majority support following a resubmission in
a year after 2018. See supra note 200.
    \207\ Note that this number is lower than 552 proposals
receiving majority support in Table 4. This is because the former
measure counts unique proposals while the latter counts each time a
proposal is submitted and receives over 50% support. Therefore, in
some instances, the latter measure will count twice a proposal that
receives majority support, is resubmitted, and receives majority
support again.

---------------------------------------------------------------------------

[GRAPHIC] [TIFF OMITTED] TP04DE19.020

    The results of the analyses in Tables 3-8, Figure 9, and
accompanying text should be interpreted with caution--our analysis of
shareholder proposal resubmissions is subject to selection bias because
the data only includes resubmissions that appeared in proxy materials.
The data does not capture resubmissions that were withdrawn because
proponents reached an agreement with management or because proponents
decided to withdraw the resubmission for other reasons, and it does not
capture resubmissions that were excluded pursuant to one of the
substantive bases under Rule 14a-8.\208\
---------------------------------------------------------------------------

    \208\ For a similar discussion, see the letter in response to
the Proxy Process Roundtable from the Shareholder Rights Group dated
December 4, 2018, at 13.
---------------------------------------------------------------------------

C. Benefits and Costs and Effects on Efficiency, Competition, and
Capital Formation of Proposed Rule Amendments

    Below we discuss the anticipated economic effects of the proposed
rule amendments. Section IV.C.1 discusses economic considerations
relevant to shareholder proposals generally, Section IV.C.2 discusses
the general economic effects of the proposed rule amendments, Section
IV.C.3 discusses the specific benefits and costs of each proposed
amendment, and Section IV.C.4 discusses the effects of the proposed
amendments on efficiency, competition, and capital formation.
1. General Economic Considerations Relevant to Shareholder Proposals
    As mentioned in Section IV.B above, Rule 14a-8 was designed to
facilitate shareholders' ability under state law to appear in person at
an annual or special meeting and, subject to certain requirements
governed by state law and the company's governing documents, present
their own proposals for a vote by shareholders at that meeting. By
giving proponents the ability to have their proposals included
alongside management's in the company's proxy statement, Rule 14a-8
allows shareholders to consider and vote on matters raised by other
shareholders for consideration at an annual or special meeting of
shareholders.
    A shareholder proposal could be value enhancing not only because it
could motivate a value-enhancing change,\209\ but also because it could
limit insiders' entrenchment \210\ and provide management with
information about the views of shareholders.\211\ On the other hand, a
shareholder proposal may not be value enhancing, and companies may bear
direct costs associated with the consideration of a proposal and/or its
inclusion in the proxy statement and these costs may be passed down to
shareholders. A shareholder proposal may not be value enhancing if it
serves the interests of a minority rather than the majority of
shareholders.\212\ Shareholders may also bear costs associated with
their own consideration of a proposal. Our economic analysis does not
speak to whether any particular shareholder proposal or type of
proposals are value enhancing, whether the proposed amendments would