Expanding Shareholder Voice: The Impact of SEC Guidance on Environmental and Social Proposals

Abstract

After a dramatic increase over the past decade, shareholder support for environmental and social (E&S) proposals seems to have waned. In this Article, we examine whether this recent decline is linked to a 2021 shift in the SEC’s policy, which expanded the ability of shareholders to influence E&S corporate decisions. We suggest that this regulatory shift has led to an increase in “prescriptive” E&S proposals, which typically call for more aggressive but costlier E&S policies by companies. Using a combination of supervised and unsupervised machine learning techniques to identify prescriptive proposals, we find that these proposals generally receive less shareholder support and seem to be driving a substantial part of the decline in support for E&S proposals. This decline is observed among the vast majority of institutional investors, including many ESG funds.

Additional Information

Co-author: Roberto Tallarita (Harvard Law School)

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Award: Best Academic Paper on ESG (Junior Category) at the ECGI–Berkeley Forum on Corporate Governance

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Recommended citation: Kenneth Khoo and Roberto Tallarita. "Expanding Shareholder Voice: The Impact of SEC Guidance on Environmental and Social Proposals." Journal of Law and Economics (forthcoming). European Corporate Governance Institute - Law Working Paper No. 822/2025.
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