Such ballots can be useful, but not when gadflies push the same unpopular agendas year after year.
When McDonald’s stockholders gathered for the company’s annual meeting in May, they had to vote on seven shareholder proposals. Among these were a proposal against the company’s use of antibiotics in its meat supply, brought by the Benedictine Sisters of Boerne, Texas; and one by the nonprofit Holy Land Principles, which wanted the company to modify its employment practices in Israel. The Boerne Sisters own 52 McDonald’s shares. The Holy Land group owns 47. None of this year’s sponsoring shareholders owned more than 0.0001% of the company’s stock.
All seven proposals failed. Four were opposed by more than 90% of shareholders. Still, all but two of the proposals could be introduced on McDonald’s proxy ballots next year. Holy Land Principles introduced the same anti-Israel proposal in 2016, and almost 97% of shareholders voted against it.
The Securities and Exchange Commission has long enabled small shareholders to pursue such agendas. Under current SEC rules, any shareholder in a publicly traded corporation that has held at least $2,000 in stock for at least a year may place a proposal on the company’s proxy ballot. A shareholder can introduce the same proposal year after year, even when 90% of all voting shareholders consistently oppose it.
Such permissive rules come at a cost. According to an SEC survey, it costs....
James R. Copland is a senior fellow and director of legal policy at the Manhattan Institute.