Church group wary of SEC plan on proxy issues
Churches involved in the so-called ''corporate responsibility'' movement could see this activity sharply curtailed by proposed changes in regulations of the Securities and Exchange Commission (SEC).
Since the 1960s, many of the more liberal denominations, Roman Catholic religious orders, and other church agencies have used stockholder rights to challenge US corporations on policy issues.
This year, the Interfaith Center on Corporate Responsibility (ICCR), a New York-based agency coordinating most of the church activity in this field, says its members are filing 118 resolutions with 85 corporations, although many will be disposed of by negotiation or other means before stockholders meet.
Among the issues covered in resolutions proposed by church groups this year are manufacture of nuclear weapons, corporate operations in South Africa and other countries, employment practices, and environmental protection.
On Oct. 14, the SEC asked for comment on suggested changes in its Shareholder Proposal Rule (14a-8), which has governed the resolution process since 1942. Timothy Smith, a United Methodist layman who is director of the ICCR, says that he does not expect the SEC to act in time to affect meetings this year, but that new rules would likely go into effect for 1984. He is asking the commission to hold hearings first, and hopes its oversight subcommittee in the House of Representatives will also examine the proposals.
The ICCR is disturbed that the commission has raised the fundamental question of whether stockholders should continue to have the right of getting resolutions included in the proxy materials that companies mail to all stockholders. Churches and others wishing to challenge management policy consider that right vital to mounting any effective campaign, because in most cases only a tiny percentage of stockholders come to the annual meeting.
Even if access to the proxy materials is reaffirmed, there are other SEC proposals that would set more restrictive guidelines for filing resolutions.
For example, the commission also asked for comment on one proposal to let each corporation set its own procedures regarding these resolutions, and another to have a company consider virtually any resolution and decide by lottery the ones to be included in proxy solicitations if the number exceeded certain limits. But Mr. Smith says he considers neither of those options realistic, since he expects the commission will continue the existing practice with some as-yet-undetermined degree of tightening up.
One SEC proposal would require those filing resolutions to have held $1,000 worth of stock for a year. Acknowledging instances of abuse by people buying a single share just to launch a protest on one particular issue, the ICCR suggests alternative ways of limiting the resolution process to more serious investors.
The churches themselves are serious investors. Concerned about income as well as social responsibility, they argue that corporations will earn higher profits over the long run if they behave responsibly and thereby gain greater public acceptance, at home and abroad.
Officials of the ICCR estimate that its members have more than $7.5 billion from their pension, endowment, and reserve funds invested in stocks, so exclusion of one-share protesters would not greatly hamper them.
They are alarmed, however, by other proposals, such as one to rule out matters affecting less than 5 percent of a corporation's business. For Exxon Corporation, for example, that could leave some $5 billion area exempt from scrutiny. In any corporation, they say, activities of little significance in dollar terms can raise crucial issues of public welfare.
Mr. Smith and Sister Patricia Wolf, a member of the Catholic Sisters of Mercy , who chairs the ICCR board, have written to the SEC summarizing what they consider church accomplishments under the current rules. Although church-sponsored challenges seldom win, Mr. Smith and Sister Wolf contend that by forcing debate at annual meetings and negotiating with executives between meetings, the churches have exerted a discernible influence.
The ICCR attorney, Paul Neuhauser, an Episcopal layman who teaches law at the University of Iowa, argues in a response to the SEC proposals that, despite the annoyance felt by management, the work of the churches in the corporate-responsibility movement has been good for business.
''We believe that, by showing that the free-enterprise system can be open, responsive, and socially responsible, they have strengthened that system and thus the society which relies upon it,'' he says.