Feb. 03, 2020
Dear Sir/Madam, On behalf of Black Group Australia Pty Ltd, I am eager to provide my comments on the “Proposed Rule on Procedural Requirements and Resubmission Thresholds under Exchange Act Rule 14a-8,” File Number S7-23-19. As you know, the shareholder proposal process plays a vital role in ensuring that our capital markets remain dynamic and efficient with continuously improving corporate governance. Shareholder resolutions are one of the most direct and transparent communication mechanisms between company management, board and its shareholders. This proposed rule change will limit the volume and increase the complexity of those communications. This will result it being more difficult for investors to get critical issues on the meeting agenda of public companies. This can only lead to more corporate complacency and corporate “tin-ears”. Last month, Chairman Clayton said the SEC’s “first goal is to protect the long-term interests of Main Street Investors.” However, this rule raises the minimum ownership threshold to file shareholder resolutions by some 1,200%, eliminates Main Street Investors’ ability to aggregate shares to meet that new threshold, and the momentum rule’s intended consequence is to remove issues from the ballot more quickly. It is incontrovertible that this rule change will limit the ability of Main Street Investors to participate in the shareholder proposal process. This strikes me as firmly inconsistent with the SEC’s stated goal of protecting the Main Street Investor’s interests. If, in your view, this rule change is indeed consistent with the SEC’s stated goal, the inescapable conclusion is that the SEC believes the best way to protect Main Street Investors is to diminish their participation in the shareholder resolution process. This view is inconsistent with a long history of shareholders (including many Main Street Investors who would now be prohibited from filing resolutions) raising critical, material issues like board diversity, greenhouse gas emissions, and non-discrimination policies. Moreover, the timing of these proposals flies in the face of Warren Buffet’s lessons as reported in the FT 31 January 2020 to companies be more candid and reduce their selective disclosure during their quarterly earnings. The Business Roundtable, an ardent supporter of this rule change, recently made headlines by releasing its Statement on the Purpose of a Corporation. That statement concluded by saying, “Each of our stakeholders is essential. We commit to deliver value to all of them, for the future success of our companies, our communities and our country.” According to SEC Commissioner Robert Jackson, a small sampling of the immediate effects of this rule change would include: More than 50% of current proposals restricting executive stock sales would be excluded from the ballots for three years 2. 65% of proposals for better reporting on climate change would be excluded 3. 50% of board diversity proposals would be excluded 4. 40% of political spending disclosure reporting proposals would be excluded At a time when market participants are affirming the inextricable link between a broad array of stakeholder interests and the financial health of their businesses, this rule serves to choke off one of the most important avenues of that dialogue and dampen investors ability to hold corporate management accountable. Thank you for your consideration of these comments. Sincerely, Graeme Black Chair Black Group Australia Pty Ltd Level 6, 10-16 Queen Street, Melbourne 3000, Victoria AUSTRALIA Tel [redacted] Fax [redacted] Mob [redacted]