As faith-based investors, we often find ourselves asking probing questions of the public companies whose shares we own – questions that go beyond a myopic focus on next quarter’s earnings or free cash flow. Are these companies preparing for the existential threat of climate change? Are they doing all they can to prevent human trafficking? Do their employees have access to reproductive healthcare?
As you might imagine, management isn't always eager to discuss these issues. That's why investors like us have a ‘tried and true’ tool to bring our concerns to the fore: the ability to file a "shareholder proposal" at the company's annual general meetings.
Now, politicians who often claim to favor free markets and free speech are trying to dismantle this tool. If they get their way, the government will decide which issues investors like us are allowed to broach with the corporate managers whom we, as shareholders, ultimately employ to act in our best interests.
Last November, the U.S. Securities and Exchange Commission quietly expanded companies’ ability to exclude shareholder proposals from proxy statements without the traditional review process. Then, last month, the SEC proposed rescinding the important shareholder proposal rule, 14a-8, which would essentially dismantle the shareholder engagement process and leave it to state laws and company bylaws to control. Federal legislation now moving through Congress would go further, prescribing in law which financial risks investors are permitted to consider and which they must ignore.
Meanwhile, many state governments are moving to restrict investor freedoms. The so-called “Proxy Advisor Transparency Act,” introduced in 14 states this year, would force faith-based investors to provide disclosures and a written financial analysis any time they provide research or analysis on a proxy ballot proposal to shareholders of a company based in that state. The law forces us to make these disclosures only if our recommendation is contrary to company management and includes a particularly insidious right for any shareholder to sue us if we do not.
Who are these legislators seeking to protect?
Investing in ways guided by our faith – not the government – is key to our success and long-term value. We view our investments not just as vehicles for financial returns but as an expression of our faith. Expressing our faith includes making economic choices.
The Presbyterian Church (U.S.A.) has been using its voice as a shareholder for over 55 years. We have engaged in meaningful dialogues with thousands of companies, most of which welcome discussions with their owners. These conversations have led to positive changes in company policies and practices. Just this summer, the 227th General Assembly of the Presbyterian Church (U.S.A.) directed us to continue engaging companies on issues related to climate change and human rights.
When Washington or state lawmakers tell a faith-based investor that certain questions are off the table — that we may not consider certain factors for portfolios holding the retirement assets of our pastors and ministry workers — it is not a neutral regulatory act. It is a constraint on how we exercise our faith in the marketplace. It is the government imposing restrictions on the church itself. The First Amendment prohibits the government from interfering with one’s ability to practice one’s faith, and these restrictions directly violate this clause.
The shareholder proposal process is a free-market mechanism. It allows owners to communicate and engage directly with the companies they own without resorting to litigation, regulation, or legislation. When it works, companies hear from their shareholders and respond. Proposals are often withdrawn because companies engage with investors and make real improvements. That is the market self-correcting — exactly what limited-government conservatives say they want.
U.S. Rep. Pat Harrigan and nine other Republican lawmakers published a public letter defending investment freedom and free-market principles. “By keeping the government from picking winners and losers and standing firm against ideological overreach, we can continue to strengthen our economy, empower workers, and safeguard the prosperity that has defined our nation for generations,” they wrote.
Allowing investors to assess risk and allocate capital as they see fit is not a left-wing cause. It is a pro-freedom and religious liberty cause. The people invested in the retirement plan trust that it will be used in a way that honors God and serves their faith accurately. They are owed the best judgment, unencumbered by political agendas dictating where Americans can and can’t invest their money.
Congress and state legislatures should protect that right, not restrict it. The freedom to invest and engage freely and responsibly, guided by faith and fiduciary duty, is not a partisan position. It is an American one.
Katie Carter is the Director of Faith-Based Investing and Shareholder Engagement at Presbyterian Life and Witness, an agency of the General Assembly of the Presbyterian Church (U.S.A.).