Davis Polk partner Ning Chiu discussed with Agenda a new compliance and disclosure interpretation released by the SEC that requires investors who threaten to vote against company directors over ESG issues to file as activists rather than passive investors.

Ning noted that the guidance is a recognition that where shareholders exert their voting influence to push for actions that end up using board elections as a tool to accomplish their objectives, even if those objectives are not directly related to the operations of their business, then it’s attempting to assert influence at the highest levels, which could implicate control at the company. One potential concerning consequence could be that “shareholders may be more muted about their voting intent as a result, even during engagement with companies, which could lead to surprises at election ballot [boxes],” Ning explained.

“Some shareholders may be reluctant to even speak about certain topics or at least speak frankly and bluntly,” she added.

“SEC Tells Passive Investors Threatening Director Votes to File as Activists,” Agenda (February 14, 2025) (subscription required)

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