Should Labor Be Allowed to Make Shareholder Proposals?

In this Article, we investigate whether labor unions and related entities should be permitted to continue to make shareholder proposals using Rule 14a-8 of the federal securities laws. We focus on the claim that labor is using the shareholder proposal mechanism to further the interests of workers at the expense of other shareholders. In particular, corporate management groups have suggested that when labor is involved in collective bargaining negotiations with management, it should be barred from submitting shareholder proposals because labor proposals seek to further interest not shared by other security holders of company. Using data on shareholder proposals from 1994 proxy season, we find that labor union proposals as a whole get as much or more support than do similar proposals made by other shareholder groups. Furthermore, when we examine a subset of labor union proposals that have been identified by management groups as instances where labor was acting in its own self-interest, we find no significant differences between shareholder support for these proposals and for other shareholders' proposals of similar nature. We conclude that regulatory reform is necessary