[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 189 Introduced in Senate (IS)]
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118th CONGRESS
1st Session
S. 189
To amend the Securities Exchange Act of 1934 to require the Securities
and Exchange Commission to require the contractual provision by large
issuers of procedural privileges with respect to certain shareholder
claims relating to board and management accountability for ``woke''
social policy actions as a condition of listing on a national
securities exchange, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
January 31, 2023
Mr. Rubio introduced the following bill; which was read twice and
referred to the Committee on Banking, Housing, and Urban Affairs
_______________________________________________________________________
A BILL
To amend the Securities Exchange Act of 1934 to require the Securities
and Exchange Commission to require the contractual provision by large
issuers of procedural privileges with respect to certain shareholder
claims relating to board and management accountability for ``woke''
social policy actions as a condition of listing on a national
securities exchange, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Mind Your Own Business Act of
2023''.
SEC. 2. FINDINGS.
Congress finds the following:
(1) The fiduciary duties of boards of directors and other
corporate actors to corporations and their stockholders are
generally established by and enforceable under State law.
(2) State law generally permits corporations discretion
with respect to altering the rights of stockholders, including
the process by which stockholders assert claims for breach of
fiduciary duties by the board of directors or other corporate
actors, limited by State law governing these fiduciary duties.
(3) The regulation of corporations as issuers of securities
authorized by Congress in the Securities Exchange Act of 1934
(15 U.S.C. 78a et seq.) generally regulates corporate behavior
in connection with the issuance of securities, including with
respect to contractual arrangements between corporations and
their stockholders via provisions in the charters and bylaws of
the corporations, and does not--
(A) establish fiduciary duties of boards of
directors or other corporate actors to corporations and
their stockholders under Federal law; or
(B) regulate the fiduciary duties of boards of
directors or other corporate actors to corporations and
their stockholders under State law.
(4) The State law fiduciary duties of boards of directors
and other corporate actors establish certain norms upon which
the national market system for securities has historically
relied, including--
(A) boards of directors and other corporate actors
generally have fiduciary duties to their respective
corporations and stockholders; and
(B) the behavior of corporations as issuers of
securities will generally conform to these fiduciary
duties, to the benefit of the protection of investors
and the public interest.
(5) Other norms related to the public interest have
historically provided critical bases upon which the national
market system for securities has historically relied, including
norms that large corporate issuers that are significant to the
national economy--
(A) generally invest corporate resources to
increase the long-term value of the corporation as a
business rather than as an agent of social change;
(B) do not use corporate resources to advance
narrowly political or partisan agendas; and
(C) do not use corporate resources to promote
socialism, Marxism, critical race theory, or other un-
American ideologies among their workforces or
customers.
(6) Though these norms are not enforceable legal duties of
boards of directors or other corporate actors under Federal
law, they substantially contribute to the commercial purpose
and nationwide availability of the national market system for
securities, which are recognized by section 2 of the Securities
Exchange Act of 1934 (15 U.S.C. 78b) as principal bases for the
regulation authorized by that Act.
(7) Certain large corporate issuers that are significant to
the national economy have recently undertaken actions which
facially violate these norms on account of apparent political
bias. Examples of such actions include the use of corporate
resources to--
(A) deny goods and services to States and their
political subdivisions, and private entities within
such States and their political subdivisions, in
response to the social policies proposed or enacted in
such States and their political subdivisions, including
those related to election procedures, restrictions on
abortion, protections for religious freedom, and
enforcement of immigration law;
(B) deny goods and services to industries and other
classes of entities on the basis of characteristics of
those industries and classes related to social policy,
including industries involved in the sale or
manufacture of firearms, operation of border security
or criminal detention facilities, and performance of
services for the United States military, and classes of
entities based on religious belief or identity;
(C) promote race and sex stereotyping, such as
those described in section 2(a) of Executive Order
13950 (5 U.S.C. 4103 note; relating to combating race
and sex stereotyping), which include such destructive
concepts that the United States is fundamentally racist
or sexist, an individual should be discriminated
against or receive adverse treatment solely or partly
because of his or her race or sex, and meritocracy or
traits such as a hard work ethic are racist or sexist,
or were created by a particular race to oppress another
race; and
(D) openly coordinate with political actors to
pursue such actions, including--
(i) undertaking such actions upon the
action (or inaction) of boards of directors and
other corporate actors that are not
sufficiently independent from conflicts of
interest with political actors, including
elected officials, political parties, news
media, labor unions, nonprofit or
nongovernmental organizations that advocate for
changes in political or social policy through
issuers, other activists affiliated with such
actors, and activist investors that advocate
for changes in corporate policy primarily
unrelated to the pecuniary interest of the
issuer; and
(ii) conceding to the demands of the
political actors without undertaking due care.
(8) The prominent, open, and public facial violation of
these norms by large corporate issuers that are significant to
the national economy undermine the commercial purpose and
nationwide availability of the national market system for
securities by spending corporate resources on noncommercial and
divisive, political and partisan causes.
(9) The threat these actions pose to the national market
system for securities establishes a public interest in ensuring
large corporate issuers that are significant to the national
economy--
(A) have adequate internal procedural mechanisms to
ensure the accountability of boards of directors and
other corporate actors with respect to their adherence
with the norms described in this section; and
(B) do not unduly burden the ability of
stockholders to assert claims for breach of fiduciary
duty under State law where the actions at issue in such
claims facially violates those norms.
SEC. 3. LISTING REQUIREMENT RELATING TO PROCEDURAL PRIVILEGES FOR
CERTAIN SHAREHOLDER CLAIMS.
The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is
amended by inserting after section 10D (15 U.S.C. 78j-4) the following:
``SEC. 10E. PROCEDURAL PRIVILEGES FOR CERTAIN SHAREHOLDER CLAIMS.
``(a) Definitions.--In this section:
``(1) Claimant.--The term `claimant' means--
``(A) a person that brings a covered claim; or
``(B) if a covered claim is brought as a class
action, the representative of the class in that action.
``(2) Controller.--The term `controller' means any person
or entity that has control, directly or indirectly, by any
means (as those terms are defined under applicable State law),
over the board of directors of an issuer--
``(A) generally; or
``(B) with respect to an action at issue in a
covered claim.
``(3) Covered claim.--The term `covered claim'--
``(A) means any single cause of action that--
``(i) asserts a claim for breach of
fiduciary duty owed by any corporate defendant
to the applicable issuer (or the shareholders
of the applicable issuer) resulting from
material action by any covered corporate actor
with respect to the applicable issuer--
``(I) that is taken primarily in
response to a law (including a
regulation) that is enacted by a State,
or a bill that is introduced in the
legislature of a State or policy
otherwise publicly proposed by an
elected official of a State, which
shall include if such action includes
any prohibition of business within that
State by an issuer, whether with
respect to business services or travel
to, or major events in, that State,
that is facially unrelated to the
pecuniary interest of the applicable
issuer, which shall presumptively
include if the law bill, or policy
would modify, establish, or create a
law relating to--
``(aa) the manner in which
elections are conducted in the
State;
``(bb) protecting religious
freedom; or
``(cc) limiting the
availability of services that
include the abortion of unborn
children;
``(II) to prohibit the sale of
goods or services by any covered
corporate actor with respect to the
applicable issuer to customers who
operate in an industry with which the
issuer engages in such business
primarily on the basis of a
characteristic of that industry that is
facially unrelated to the pecuniary
interest of the applicable issuer;
``(III) to promote a covered
divisive concept; or
``(IV) for which the reasoning
publicly presented by any covered
corporate actor with respect to the
applicable issuer as--
``(aa) any basis for such
action promotes a covered
divisive concept; or
``(bb) the primary basis
for such action is facially
unrelated to the pecuniary
interest of the applicable
issuer, which shall
presumptively include any
reference to diversity, equity,
or inclusion with respect to
the composition of the
workforce, management, or board
of directors of the issuer or
society in general; and
``(ii) is brought by a covered shareholder
as--
``(I) a direct action; or
``(II) a derivative action or
proceeding brought on behalf of the
applicable issuer; and
``(B) does not include a cause of action that
asserts a claim for the breach of fiduciary duty owed
by any corporate defendant to the applicable issuer (or
the shareholders of that issuer) resulting from--
``(i) a charitable contribution by any
covered corporate actor with respect to the
applicable issuer;
``(ii) the exercise of religion by any
covered corporate actor with respect to the
applicable issuer;
``(iii) business activity by any covered
corporate actor in connection with the national
security of the United States, the Armed
Forces, or veterans of the Armed Forces; or
``(iv) the limitation of business by any
covered corporate actor with respect to the
applicable issuer--
``(I) occurring in the jurisdiction
of, or with an agent of the People's
Republic of China, the Russian
Federation, North Korea, Iran, Syria,
Sudan, Venezuela, or Cuba;
``(II) in connection with
preventing the abuse of internationally
recognized worker rights, as defined in
section 507 of the Trade Act of 1974
(19 U.S.C. 2467);
``(III) with any entity that
derives directly or indirectly more
than de minimis gross revenue through
the sale of products or services, or
the presentation of any depictions or
displays, of a prurient sexual nature;
``(IV) with any entity that engages
in a commerce- or investment-related
boycott, divestment, or sanctions
activity that targets Israel; or
``(V) that is required under
Federal, State, or local law.
``(4) Covered company.--The term `covered company' means an
issuer that has, as calculated in accordance with section
240.12b-2 of title 17, Code of Federal Regulations, or any
successor regulation--
``(A) a public float of more than $20,000,000,000;
or
``(B) annual revenues of more than $5,000,000,000.
``(5) Covered corporate actor.--The term `covered corporate
actor' means--
``(A) an issuer;
``(B) a director, officer, or affiliate of an
issuer;
``(C) a controller with respect to an issuer; or
``(D) any person acting in the capacity of an
officer or agent of an issuer.
``(6) Corporate defendant.--The term `corporate defendant'
means any individual who--
``(A) is a director, officer, affiliate of an
issuer, or controller; and
``(B) may be named as a defendant in a cause of
action for breach of fiduciary duty under applicable
State law.
``(7) Covered divisive concept.--The term `covered divisive
concept' means any concept described in section 2(a) of
Executive Order 13950 (5 U.S.C. 4103 note; relating to
combating race and sex stereotyping).
``(8) Covered shareholder.--
``(A) In general.--The term `covered shareholder'
means a shareholder that, as of the date on which a
covered claim with respect to the issuer is filed and
at all times during which the covered claim described
in subparagraph (A) is pending, has continuously owned
not less than--
``(i) $2,000 in market value of the
securities of the issuer for at least 3 years;
``(ii) $15,000 in market value of the
securities of the issuer for at least 2 years;
or
``(iii) $25,000 in market value of the
securities of the issuer for at least 1 year.
``(9) Director.--The term `director' means, with respect to
an issuer, a member of the board of directors of the issuer.
``(10) Investment adviser; private fund.--The terms
`investment adviser' and `private fund' have the meanings given
the terms in section 202 of the Investment Advisers Act of 1940
(15 U.S.C. 80b-2).
``(11) Investment company.--The term `investment company'
has the meaning given the term in section 3 of the Investment
Company Act of 1940 (15 U.S.C. 80a-3).
``(12) Issuer.--The term `issuer' means an issuer with a
class of securities registered pursuant to section 12.
``(13) Nonpecuniary investment entity.--The term
`nonpecuniary investment entity' means--
``(A) any investment company or private fund that
invests, reinvests, or trades, or proposes to invest,
reinvest, or trade in, or that exercises any control
right with respect to any security primarily on a basis
that is facially unrelated to the pecuniary interest of
any beneficiary of the company or fund for which the
activity occurs with respect to the security;
``(B) any investment advisor that provides any
advice that is not a charitable contribution--
``(i) that is for compensation; and
``(ii) the basis for which is primarily
unrelated to the pecuniary interest of the
party receiving the advice;
``(C) any entity that engages in activism with
respect to issuers to which section 14 applies for
which the primary basis of the activism is facially
unrelated to the pecuniary interest of the issuers to
which the activism is directed, including--
``(i) nominating candidates for election as
directors of those issuers; or
``(ii) making shareholder proposals
pursuant to that section; and
``(D) any labor organization, as defined in section
2 of the National Labor Relations Act (29 U.S.C. 152),
or pension fund affiliated with a labor organization.
``(b) Requirements.--
``(1) Rules.--Not later than 1 year after the date of
enactment of the Mind Your Own Business Act of 2023, the
Commission shall, by rule, direct the national securities
exchanges and national securities associations to prohibit the
listing of any security of any covered company that is not in
compliance with the requirements of this section.
``(2) Issuer requirements.--The rules issued under
paragraph (1) shall require each issuer, to the maximum extent
permitted by State law, in the articles of incorporation or
bylaws of the issuer, to provide, with respect to any covered
claim, that any corporate defendant with respect to the issuer
that is named as a defendant in the covered claim shall--
``(A) be bound by the presumptions established
under subsection (c) with respect to any factual
representation made in connection with the covered
claim, including any factual representation relating to
whether a claim asserted is a covered claim;
``(B) have the burden of proof with respect to any
determination of independent business judgment;
``(C) if the claimant obtains a judgment on the
merits in the covered claim, be jointly and severally
liable for money damages to the claimant in an amount
that is not less than the greater of--
``(i) treble damages; or
``(ii) 2 times the total compensation paid
by the issuer to all directors of the issuer
for the year in which the primary action
alleged in the covered claim substantially
occurred, including the market value of all
securities issued as compensation to those
directors in that year;
``(D) if the claimant obtains all or some of the
relief sought in the covered claim, whether by court
order, settlement, voluntary change in the conduct of
the defendant, or otherwise, reimburse the claimant for
the greatest amount permitted by law with respect to
all fees, costs, and expenses of every kind and
description (including all reasonable attorney's fees
and other litigation expenses) that the claimant may
obtain in connection with the covered claim; and
``(E) not be indemnified by the issuer for any
liability, loss (including attorney's fees, judgments,
fines, or amounts paid in settlement) incurred or
suffered in connection with the covered claim.
``(c) Presumptions.--For the purposes of this section, the
following presumptions shall apply with respect to any covered claim,
including with respect to any factual representation relating to
whether a claim asserted is a covered claim:
``(1) Pecuniary interest.--There shall be a presumption
that the pecuniary interest of an issuer, including the best
interest of the issuer to the extent that such interest is
substantially similar to the pecuniary interest of the issuer,
does not include--
``(A) the morale of, or ability of the issuer to
hire or retain, supervisory employees in general;
``(B) the diversity of the board of directors,
management, or workforce in general with respect to any
characteristic protected by section 703 of the Civil
Rights Act of 1964 (42 2000e-2);
``(C) the public relations, image, value of
marketing, or coverage by the news media of the issuer;
or
``(D) any financial benefit or reduction in cost,
including the cost of capital to the issuer, to the
extent the pecuniary benefit of or to such benefit or
reduction in cost is caused by the--
``(i) investment in the securities of the
issuer by a nonpecuniary investment entity; or
``(ii) inclusion of the securities of the
issuer in indexes created by index providers
that select those indexes on a primarily
nonpecuniary basis or that include such
securities in any index on a primarily
nonpecuniary basis.
``(2) Demand excused.--For the purpose of determining
whether demand is excused with respect to a covered claim,
there shall be a presumption that a director is not independent
if the director is employed, controlled, or nominated by, or
otherwise has a history of affiliation with a nonpecuniary
investment entity or any affiliate of a nonpecuniary investment
entity.
``(d) Rules of Construction.--Nothing in this section may be
construed--
``(1) to limit the exercise of religion, as defined in
section 5 of the Religious Freedom Restoration Act of 1993 (42
U.S.C. 2000bb-2) of any issuer or any director, officer, or
affiliate of an issuer; or
``(2) as establishing a fiduciary duty by any corporate
defendant or corporate actor.''.
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