Reaffirming the Fundamental Right to Shareholder Proposals and Enhancing Board Accountability via Private Ordering

Spring 2026 Policy Amendment 1: Shareholder Proposals

CII amended Policy 1.5 by inserting this sentence: “The ability to submit and vote on shareholder proposals is a fundamental right and allows investors to monitor and hold corporate management accountable.” The full policy is now:

1.5 Shareowner Participation: The ability to submit and vote on shareholder proposals is a fundamental right and allows investors to monitor and hold corporate management accountable. Shareowners should have meaningful ability to participate in and vote on the major fundamental decisions that affect corporate viability, and meaningful opportunities to suggest or nominate director candidates and to suggest processes and criteria for director selection and evaluation. Shareowners also should have meaningful ability to propose bylaw amendments that become effective upon the approval of a majority of outstanding shares.

Background & Intent

Shareholder proposals are an essential and efficient means for investors, individually and collectively, to express their views to management and boards on major governance and other issues.

• The ability for shareholders to submit proposals is an important tool – even if these proposals do not go to a vote. Many proposals, in fact, are withdrawn after they are submitted, as companies and proponents often come to an agreement after having constructive dialogue.
• Companies may find shareholder proposals to be helpful in terms of what issues may be important to their investors – and do not see the process as necessarily adversarial.
• The ability to file shareholder proposals is particularly critical for those investors that are not among the top investors in any company. Companies often do not engage such investors, much less respond to their requests.
• The vast majority of shareholder proposals are strictly advisory; even if they pass, companies determine how and whether to act on them.
• Shareholder proposals have encouraged many companies to adopt governance policies that today are viewed widely as best practice. For example, electing directors by majority vote, a radical idea a decade ago when shareholders pressed for it in proposals, is now the norm at 90% of large-cap U.S. companies. Similarly, governance enhancements such as independent directors constituting a majority of the board and annual elections for all directors were substantially driven by shareholder proposals.
• Critics contend that shareholder proposals are a growing burden on companies. But data on shareholder proposals filed between 2004 and 2017 refute that notion. See this FAQ for details.
• Companies greatly exaggerate the cost of shareholder proposals. The cost is largely their choice; it is the cost of trying to exclude the proposal from the proxy. The cost to put a proposal on the proxy ballot is de minimis. In any event, the costs are outweighed by the benefit to shareholders of increased board accountability, among other benefits.

Spring 2026 Policy Amendment 2: Board’s response to meaningfully-weakened protections for their shareholders

CII amended Policy 1.4 by inserting this sentence: “When a jurisdiction meaningfully weakens protections for a company’s shareholders, the board should conduct a review and disclose the specific standard that was weakened, an analysis of options to preserve protections such as through private ordering, and the board’s rationale for its decision.” The full policy is now:

1.4   Accountability to Shareowners: Corporate governance structures and practices should protect and enhance a company’s accountability to its shareowners, and ensure that they are treated equally. An action should not be taken if its purpose is to reduce accountability to shareowners. When a jurisdiction meaningfully weakens protections for a company’s shareholders, the board should conduct a review and disclose the specific standard that was weakened, an analysis of options to preserve protections such as through private ordering, and the board’s rationale for its decision.

Background and Intent

Poor corporate governance can be value-reducing for firms. Through various sources of law, such as statutes, regulations, enforcement actions, and judicial decisions, jurisdictions may impose minimum requirements on corporations in order to promote strong long-term performance and protect shareholder rights.

When jurisdictions weaken shareholder protections, they usually lower the bar for the minimum standards that all corporations must meet. However, they do not usually prohibit or restrict corporations from adopting better corporate governance practices or committing to practices that exceed the minimum standards.  For example, SB 21 in Delaware recently narrowed the definition of who is considered a controlling shareholder, which would trigger special protections for minority shareholders in conflicted transactions. Corporations could commit in advance that they would follow these additional procedures even when it is not a legal requirement. Even in the absence of government-imposed requirements, voluntary commitments or actions by corporations can be value-protecting.

This policy seeks to respond to decreasing minimum standards in corporate governance by setting an expectation that when jurisdictions meaningfully weaken shareholder protections, boards of directors in those jurisdictions should consider whether to continue those protections through private ordering- whether through a charter amendment, bylaw, or other commitments.

About CII Policies

All CII policy amendments are approved by both the CII Board of Directors and a majority of U.S. Asset Owners members. CII solicits comments on proposed policies from all its members, regardless of membership category, before final adoption. While CII’s policies are corporate governance recommendations, they are not binding on members.