What is a shareholder proposal?

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Posted 9 years ago

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A shareholder proposal is a resolution put forward by a shareholder or group of shareholders for consideration at a company's annual meeting. The proposal is filed to initiate change on a certain company issue. Often, management opposes these proposals and urges shareholders to vote against them. However, management may negotiate with a filer to make changes in corporate policy to avoid the threat of a shareholder proposal. Virtually all shareholder proposals are non-binding. While companies can and sometimes ignore shareholder proposals that receive majority shareholder support, it is generally a sign of poor corporate governance that can expose the company to heightened investor scrutiny going forward. On the other hand, shareholder proposals that do not receive majority support may also lead to change, especially when there is strong shareholder support. Withdrawn proposals often indicate success for the filer in that the company has agreed to partially or wholly implement the proposal.