A coalition of 14 legal scholars with expertise in the First Amendment and securities disclosures law submitted a friend of the court brief in support of the constitutionality of the Securities and Exchange Commission’s (SEC) Rule 14a-8 (“the Rule”), known as the “Shareholder Proposal Rule,” an anti-fraud measure that requires companies to include certain shareholder proposals in their proxy statements. The scholars’ brief explains that the constitutionality of corporate disclosure rules like the Rule, which protects shareholders’ right to make informed votes on important matters of corporate governance, has never been seriously doubted.
Under the Rule, which the SEC first created in 1942 and which has been modernized over time, the SEC determines which shareholder proposals need to be included in a proxy statement and which ones do not. National Center for Public Policy Research (NCPPR) v. SEC is a case in which NCPPR, a far-right group and shareholder in Kroger, is challenging a ruling from the SEC that determined a proposal from NCPPR did not need to be included in Kroger’s proxy statement. The National Association of Manufacturers (NAM) has seized on NCPPR’s case as an intervenor to challenge the constitutionality of the Rule itself. NAM is making a radical argument: that corporations should not be required to disclose any shareholder proposals in their proxy statements. This position ignores—and NAM repeatedly overlooks—the vital function that proxy statements perform in modern corporate governance.
Represented by Democracy Forward, the legal scholars who submitted the brief have significant expertise in the First Amendment and securities disclosure laws. The legal scholars’ brief refutes NAM’s radical argument that corporations should not be required to disclose any shareholder proposals in their proxy statements. The brief also explains the vital function that proxy statements perform in modern corporate governance.
“As the brief from more than a dozen First Amendment and securities law scholars makes clear, there has never been a serious debate that corporate disclosure rules like the Securities and Exchange Commission’s (SEC) ‘Shareholder Proposal Rule’ are constitutional,” said Skye Perryman, President and CEO of Democracy Forward. “Every shareholder has a right to make informed decisions on important matters of corporate governance, but that right is now under attack. We urge the court to uphold the constitutionality of this rule that simply protects shareholders from fraud.”
The fourteen legal scholars who submitted the brief are:
- Sarah Haan, Class of 1958 Uncas and Anne McThenia Professor of Law, Washington & Lee University School of Law
- Enrique Armijo, Professor of Law, Elon University School of Law
- Carliss N. Chatman, Associate Professor, SMU Dedman School of Law
- George S. Georgiev, Associate Professor, Emory University School of Law
- Kent Greenfield, Professor of Law and Dean’s Distinguished Scholar, Boston College Law School
- Kyle Langvardt, Assistant Professor of Law, University of Nebraska College of Law
- Amelia Miazad, Acting Professor of Law, UC Davis School of Law
- Helen Norton, University Distinguished Professor and Rothgerber Chair in Constitutional Law, University of Colorado School of Law
- Omari Scott Simmons, Professor of Law, The George Washington University Law School
- Faith Stevelman, Professor of Law, New York Law School
- James Tierney, Assistant Professor, Chicago-Kent College of Law
- Alexander Tsesis, Professor of Law & D’Alemberte Chair in Constitutional Law, Florida State University College of Law
- Anne M. Tucker, Professor of Law, Georgia State University College of Law
- Karen E. Woody, Associate Professor, Washington and Lee University School of Law