The Stop Woke Investing Act would require the Securities and Exchange Commission (SEC) to revise its rules governing shareholder proposals included in company proxy statements. The core change is to cap how many shareholder proposals a company must consider for inclusion in a given proxy, with the cap depending on the company’s filer status (non-accelerated, accelerated, or large accelerated). Proposals would only be eligible for inclusion if they have a material effect on the company’s financial performance. Importantly, any proposal from a board member could not be included. The SEC would have 180 days after enactment to implement these changes. The bill’s overall aim appears to curb what its sponsors view as “woke” or ESG-driven shareholder activism by restricting the scope and number of proposals that must be presented to shareholders.
Key Points
- 1Caps on included shareholder proposals by filer status: non-accelerated filers can include up to 2 proposals, accelerated filers up to 4, and large accelerated filers up to 7, subject to the materiality requirement.
- 2Materiality gate: a proposal may be included only if it has a material effect on the financial performance of the company (i.e., a risk/return that a reasonable investor would view as important when evaluating investment or exercising rights).
- 3Company control and disclosure: the company determines which proposals to include (within the caps) and must disclose the method used to decide inclusion to the SEC.
- 4Prohibition on board-proposed items: no proposal submitted by a member of the company’s board of directors may be included.
- 5SEC rulemaking timeline and scope: the SEC must amend existing shareholder-proposal rules (14a-8) within 180 days of enactment; the amendments do not create new rights to include proposals beyond the stated caps and materiality test, and they preserve the SEC’s authority to repeal or modify rules.