May 27, 2017
The Honorable Edward Markey
255 Dirksen Senate Office Building
Washington, DC 20510
The Honorable Elizabeth Warren
317 Hart Senate Office Building
Washington, DC 20510
The Honorable Stephen Lynch
One Harbor Street, Suite 304
Boston, MA 02210
Re: Section 844 of the Financial CHOICE Act
Dear Senator Markey, Senator Warren, and Representative Lynch:
I am the President of Green Century Capital Management, an environmentally and socially responsible mutual fund company based in Boston, Massachusetts. We believe shareholder engagement is an important tool for all investors because of its many potential benefits, including greater transparency of risks, enhancements to shareholder value, protection of shareholder rights, and improvement of environmental, social, and governance practices. We sincerely thank you for your efforts to combat the Financial CHOICE Act of 2017.
We are extremely concerned about the changes proposed in Section 844 of the Act, which would eviscerate Rule 14a-8 of the Securities Exchange Act of 1934 (the “shareholder proposal rule”), effectively stopping shareholders from engaging corporations through the shareholder proposal process.
For investors, the shareholder proposal rule is a vitally important, market-based mechanism for shareholders of all sizes to communicate with companies, directors and other shareholders. For decades now, the rule has been highly constructive in facilitating dialogue between shareholders and companies and providing market-driven insights on issues of deep interest to shareholders and the marketplace.
Section 844 of the CHOICE Act would severely roll back the shareholder proposal rule by increasing the requirements to file or re-submit a proposal. The proposed changes are excessive and inappropriate:
- Ownership requirements would increase from $2,000 worth of stock held for at least one year to 1 percent of the stock for at least three years. The change would require a Wells Fargo* shareholder to own more than $2.5 billion of stock to submit a proposal, which only 12 investors hold.
- Resubmission thresholds would at least double to 6 percent in year one (from 3 percent), 15 percent in year two (from 6 percent) and 30 percent in year three (from 10 percent).
These changes would disenfranchise all but the very largest institutional investors and halt the extraordinary progress—including more independent and diverse boards, enhanced disclosure practices, and stronger investor rights and protections—that have resulted from the rule.[i] In March 2017, organizations representing $65 trillion in assets under management wrote in opposition to these changes.[ii] Our concern expands beyond Section 844 of the CHOICE Act, to the Act’s impacts on the authority and oversight of banks and ultimately on consumer protection as well.
We encourage Congress to instead focus its efforts on reforms to restore American trust in the capital markets. According to a Gallup poll (released April 20, 2016), 52 percent of Americans currently have money in the stock market—matching the lowest ownership rate in Gallup’s 19-year trend. Slashing the rights of investors will do nothing to rebuild confidence and trust in U.S. markets. We therefore urge you to continue your leadership in opposing this Act, and thank you for supporting shareholder rights.
Green Century Capital Management
[i] Further information about the impacts of Section 844 and the reasons for maintaining the current shareholder rule can be found on US SIF: The Forum for Sustainable and Responsible Investment’s website, an organization of which we are a member:
[ii] The letter can be found on the Interfaith Center on Corporate Responsibility’s website, an organization of which we are a member:
*Securities mentioned were not held in any of the portfolios of any of the Green Century Funds as of March 31, 2017. References to specific securities, which will change due to the ongoing management of the Funds, should not be construed as a recommendation by the Funds, their administrator, or their distributor.
Stocks will fluctuate in response to factors that may affect a single company, industry, sector, country, region, or market as a whole and may perform worse than the market. Foreign securities are subject to additional risks such as currency fluctuations, regional economic and political conditions, differences in accounting, and other unique risks compared to investing in securities of U.S. issuers. Bonds are subject to risks including interest rate, credit, and inflation. The Funds’ environmental criteria limit the investments available to the Funds compared to mutual funds that do not use environmental criteria.
You should carefully consider the Funds’ investment objectives, risks, charges, and expenses before investing. To obtain a Prospectus that contains this and other information about the Funds please click here, email firstname.lastname@example.org, or call 1-800-934-7336. Please read the Prospectus carefully before investing.
This information has been prepared from sources believed reliable. The views expressed are as the date of publication and are those of the Advisor to the Funds.
The Green Century Funds are distributed by UMB Distribution Services, LLC. 5/17