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Public companies now have a new way to combat the influence of activist shareholders and proxy advisory firms, thanks to the Securities and Exchange Commission’s approval of a retail voting program proposed by ExxonMobil.

What’s going on: On Sept. 15, the SEC issued a “no action” letter that authorizes ExxonMobil to allow its individual shareholders to elect in advance to have their shares voted in accordance with the proxy voting recommendations of the company’s board of directors.

• “While ExxonMobil is the first U.S. company to seek regulatory approval for such a program, other public companies will be able to take advantage of this no-action letter and set up similar programs to increase their retail investor support under the conditions outlined by the SEC,” the NAM told its Corporate Finance Policy Committee in a recent email.

Why it’s important: For companies with a significant percentage of retail investors, the adoption of similar programs should make it harder for shareholder activists to do something they’ve done increasingly in recent years: hijack the corporate proxy ballot process to advance agendas that have little to do with long-term shareholder value.

• Activist proposals have forced companies to take official stands on hot-button political issues and increase costs for them and their investors.
• In fact, every shareholder proposal “can impose direct costs in excess of $150,000,” the NAM told House lawmakers this month.

What it entails: Here are some of the key conditions listed in the SEC’s approval of ExxonMobil’s retail voting program:

• Retail shareholders that have opted into the retail voting program will get an annual reminder (when the company is not soliciting votes for its annual shareholder meeting) of their opt-in status and selection and will be reminded that they can opt out and/or cancel their standing voting instruction for future shareholder meetings.
• Shareholders participating in the program will be able to both opt out and override the instruction with respect to any proposal at no cost.
• Participating retail shareholders can continue receiving proxy materials filed for upcoming meetings, and the voting program won’t limit or restrict shareholders from voting using the proxy materials received.