ISS reports:
I continue to oppose the use of the shareholder proposal rule to advance a political agenda. The problem is the idiotic Lovenheim rule. which states that shareholder proposals having "ethical or social" significance must be included in the company's proxy statement so long as they have some slight nexus to the company's business. Lovenheim v. Iroquois Brands, Ltd., 618 F. Supp. 554, 559 (D.D.C. 1985).
Here is a plausible alternative to the Lovenheim approach: Courts should ask whether a reasonable shareholder of this issuer would regard the proposal as having material economic importance for the value of his shares. This standard is based on the well-established securities law principle of materiality. It is intended to exclude proposals made primarily for the purpose of promoting general social and political causes, while requiring inclusion of proposals a reasonable investor would believe are relevant to the value of his investment. Such a test seems desirable so as to ensure that an adopted proposal redounds to the benefit of all shareholders, not just those who share the political and social views of the proponent. Absent such a standard, the shareholder proposal rule becomes nothing less than a species of private eminent domain by which the federal government allows a small minority to appropriate someone else’s property—the company is a legal person, after all, and it is the company’s proxy statement at issue—for use as a soap-box to disseminate their views. Because the shareholders hold the residual claim, and all corporate expenditures thus come out of their pocket, it is not entirely clear why other shareholders should have to subsidize speech by a small minority.
