Legal Definitions - shareholder proposal

A shareholder proposal is a formal suggestion submitted by one or more owners (shareholders) of a corporation to influence its management, policies, or operational procedures. These proposals are typically included in the company's proxy materials and presented to all other shareholders for a vote at the annual shareholder meeting.

• Example 1: Environmental Sustainability

  A coalition of institutional investors, who collectively own a significant number of shares in a large manufacturing company, submits a proposal. Their proposal asks the company to commit to sourcing 100% of its electricity from renewable energy sources within the next five years. This shareholder proposal aims to change the company's long-term energy policy and reduce its environmental footprint.

• Example 2: Executive Compensation Transparency

  An individual shareholder, concerned about the lack of clarity in executive pay structures, puts forward a proposal. This proposal requests that the company's board of directors provide a detailed report annually, outlining the specific performance metrics used to determine executive bonuses and the rationale behind each executive's compensation package. This shareholder proposal seeks to enhance transparency and potentially influence the company's procedures for executive remuneration.

• Example 3: Board Diversity Initiative

  A group of activist shareholders in a technology firm submits a proposal urging the company to adopt a policy that requires at least 40% of its board of directors to be composed of individuals from underrepresented demographic groups by a specific date. This shareholder proposal is an effort to change the company's governance policy regarding board composition and promote greater diversity within its leadership.