Some corporations seek to silence ‘Trojan Horse’ activists

livemint.com:

The Securities and Exchange Commission under the Biden administration has made it easier for investors to try to drag corporations into political and cultural battles, but brewing lawsuits seek to silence the activists. After a change in SEC policy eased the path for shareholders to bring forward certain proposals, investors of all political stripes have increasingly pressed companies on hot-button issues such as climate, abortion, guns and diversity, filing hundreds of proposals each year.

The trend has continued into this year’s proxy season—the period when most companies have their annual meetings—which is unfolding now. But companies, many of which don’t want to wade into reputationally risky areas, might get the chance to tell shareholders to pipe down.

In one suit challenging the status quo, oil-and-gas company Exxon Mobil, a frequent target of shareholder proposals, sued two shareholder proponents, arguing that they were activists pursuing a “Trojan horse" strategy to gain a platform to deliberately hurt its business despite only holding a tiny amount of shares. In another suit now before a federal appeals court in New Orleans, the National Association of Manufacturers, a powerful Washington trade association, is arguing that the SEC has overstepped its bounds and shouldn’t be involved in deciding which proposals make it through.

Under the current system, shareholders are allowed to “commandeer" company proxy statements to try to advance their social or political goals in the corporate sphere after they failed in the political arena, NAM said in a court filing. The SEC is the gatekeeper on what companies must include in their proxy statements.