In May 2023, the National Association of Manufacturers (NAM) successfully filed a motion to intervene in a federal case brought by the anti-ESG group the National Center for Public Policy Research (NCPPR) against the Securities and Exchange Commission (SEC), challenging a shareholder resolution No Action determination. The NAM motion opened a broader challenge to the SEC’s authority to provide guidance regarding whether shareholder resolutions could be allowed on a company’s proxy for a vote, claiming that this process violates principles of corporate First Amendment rights enshrined in the Citizens United ruling.
NAM has pursued the case even as Kroger, the target of the NCPPR resolution, mooted the case by allowing the resolution on the proxy. The NAM appeal in the Fifth Circuit has deeply significant implications for shareholder rights and threatens a decades-old process whereby the SEC has the authority to issue a No Action determination pursuant to Rule 14(a)(8). ICCR filed an amicus brief with the 5th Circuit, as did As You Sow and other allies, making the case for the importance of shareholder proposals as part of a long-standing and well-balanced private ordering process enabling constructive dialogue between shareholders and management on matters of long-term risk.
Deeply concerned about the NAM intervention and its implications, ICCR partnered with Ceres to send letters to approximately 50 board directors of NAM member companies urging these corporate executives to publicly express their disagreement with this legal action and highlighting the significant negative consequences if the lawsuit were successful.
This intervention by NAM is part of a broader assault by well-funded political opponents to dismantle the shareholder resolution process and silence the voices of shareholders concerned about long-term, systemic risks. Another prong of this strategy is the lawsuit filed in February 2024 by ExxonMobil, an influential member of NAM, against two smaller shareholders of the company. The lawsuit, filed in federal court in a friendly venue, the Northern District of Texas, sought to bypass the SEC No-Action process by asking the court to block a proposal pressing the company to accelerate the pace of emissions reductions. Even after the proponents withdrew the resolution rendering the lawsuit legally moot, Exxon chose to pursue the case -- announcing that it would also seek compensation from shareholder proponents for any legal costs. This further demonstrated the glaringly obvious: that the company’s true intent was to bring a strategic litigation against public participation “SLAPP” suit designed to intimidate shareholders from filing any further resolutions focused on climate risk to the company. In deriding the proponents as having an “extreme agenda”, Exxon sought to distract attention from its responsibilities to investors and the public to address its outsized contributions to climate change. The systemic and existential risks presented by climate change are, of course, a major concern for businesses and global investors of all sizes. Like the NAM lawsuit, the Exxon case seeks to directly undermine the authority of the SEC, which should be an ominous sign for all investors. ICCR and many other investors are profoundly distressed by Exxon’s suit against its shareholders and sent a letter to the Board of Directors asking them to intervene.
The attack on shareholder rights is part and parcel of the broader attack on corporate accountability by many of the same well-funded players who have packed the courts with right-wing judges and have worked to dismantle public policy that would put reasonable guardrails on corporate conduct. This includes the case currently before the Supreme Court of Loper Bright Enterprises v. Raimondo, challenging the decades-old doctrine of Chevron deference, which gives federal agencies deference to write sensible rules to carry out the laws of Congress. If this precedent is overturned as many fear, it will put current and future regulations on the environment, labor, health, finance, and other critical areas of public interest at risk.
As a community of institutional investors concerned about the systemic risks that corporate negative externalities impose on a healthy economy and sustainable planet, our collaborative work is more important than ever. Mobilization by institutional investors, working with other key stakeholders, is desperately needed to ensure continued progress by corporations on so many critical systemic challenges.
Josh Zinner
CEO, Interfaith Center on Corporate Responsibility (ICCR)
Tim Smith
Senior Policy Advisor, Interfaith Center on Corporate Responsibility