SEC Says Companies Must Let Shareholders Vote on Health Care

June 2, 2008 ( - The Securities and Exchange Commission (SEC) has shifted its position and is telling companies they must allow shareholders to vote on a proposal for universal health insurance coverage.

The New York Times reports the proposal being put forth by shareholders, including religious groups and labor unions that hold billions of dollars worth of the companies’ stock in their pension and health benefit plans, asks companies to adopt “principles for comprehensive health care reform” like those devised by the Institute of Medicine, an arm of the National Academy of Sciences. The institute says health insurance should be universal, continuous, “affordable to individuals and families,” and “affordable and sustainable for society,” according to the news report.

The groups pushing the proposal say they intend to broaden the proxy campaign by bringing in more pension plans next year. However, in a recent advisory opinion, the Department of Labor’s Employee Benefit Security Administration (EBSA) expressed that plan fiduciaries risk violating the Employee Retirement Income Security Act’s exclusive benefit rule when they exercise their fiduciary authority in an attempt to further legislative, regulatory, or public policy issues through the proxy process (See Use of Plan Assets for Non-Plan Related Political Issues Violates ERISA ).

The shareholder proposal does not require companies to provide health benefits for employees, but asks top corporate executives to view the issue as a question of social policy, according to the New York Times. Under the SEC’s rules, a company does not have to allow shareholders to vote on a proposal if it “deals with a matter relating to the company’s ordinary business operations,” but the commission said it was appropriate for shareholders to express their views to company management by voting on “significant social policy issues” beyond day-to-day business matters.

Some companies – such as General Electric, UnitedHealth, and ExxonMobil – are inviting dialogue over the issue, and the shareholders are in turn withdrawing the proxy resolution.