Congresswoman Maxine Waters (D-CA), the top Democrat on the House Financial Services Committee, delivered the following testimony in front of the Rules Committee on Republican-led bill H.R. 4790. Among many things, this bill would limit investors’ rights to put forward, and vote on, new corporate policies; inhibit investors’ access to crucial information about the companies they own; and reverse the progress many public companies and banks have made towards addressing climate risks, bolstering a more diverse and inclusive workforce, and adopting socially responsible practices.
Thank you, Chairman Burgess and Ranking Member McGovern. Even though a government shutdown looms ahead of us, which would cause harm to small businesses, our capital markets, and our economy, we are here instead prioritizing MAGA culture wars at the expense of economic growth and stability.
H.R. 4790 is a blatant attempt to deny what most of the world knows is true—that climate change is real and poses real financial risks to the U.S. economy. This bill is also another MAGA attempt to divide America by disparaging, rather than celebrating, our country’s rich diversity. It takes a page right out of Trump’s Project 2025 playbook, which aims to restrict the rights of women, minorities, and other historically disenfranchised groups to influence corporate decision-making, and denies the significant impact that a diverse workforce and climate risk management can have on a company’s bottom line.
There is substantial research indicating that companies that embrace climate risk management and hire diverse boards perform better than their similarly situated peers. For example, corporations that are actively managing and planning for climate change—which includes providing public climate-related disclosures—secure an 18 percent higher return on investment than companies that aren’t – and 67 percent higher than companies who refuse to disclose their emissions.
Furthermore, research shows that diverse boards lead to improved financial results. Indeed, companies with the highest percentages of women board directors outperformed those with the least by 53 percent when it comes to shareholder returns.
These policies—which are part of a group known as Environmental, Social and Governance or “ESG” policies—help corporations maximize profits, shareholder value, and grow the overall economy. What’s also true is that many ESG policies are now commonplace, like requiring companies to have independent directors on their board, and policies to treat their workers fairly. So when Republicans tell you that ESG is bad for business, think again. ESG is good for American investors, good for businesses, and good for workers.
H.R. 4790 is a package of several harmful bills that were previously reported out of the House Financial Services Committee without a single Democratic vote. The bills in this package deny climate change and disparage the strength of American diversity from several different angles. First, this bill would restrict the Securities and Exchange Commission’s – or SEC’s – authority to require public companies disclose important information about their businesses—particularly with regards to environmental, diversity, and other employee-related metrics. It also hampers the SEC’s general ability to determine what information investors should have access to in public filings. This provision goes beyond climate risk and diversity disclosures, however, by taking away the SEC’s ability to determine in the future what a public company should disclose—and instead hands that responsibility over to the company itself. This would turn 90 years of securities laws, which have contributed to building a capital market that is envied by the rest of the world, on its head.
H.R. 4790 would also effectively eliminate shareholders’ legal right to have their proposals included for a vote at a company’s annual meeting. Under this provision, companies, rather than the SEC, would have the final say on what proposals are included for a vote at a company’s annual shareholders’ meeting. As a result, shareholders— who by definition are owners of these public corporations— effectively no longer have a say in how their companies are run. This is despite the storied history shareholder proposals have in promoting key governance standards, like majority-independent boards, board diversity, “say-on-pay” executive compensation, and annual director elections. They also allow shareholders to raise other critical issues for management beyond just ESG, such as past proposals on the use of child labor in supply chains, the harms of generative AI in spreading misinformation, and management’s accountability related to the opioid crisis.
As if it couldn’t get worse, not only does this bill give companies the ability to choose what shareholder proposals can and cannot be included for a vote, it also makes it harder for shareholders and their representatives to put forth proposals in general especially those requiring a company to account for wildfire exposure, hurricanes, and other extreme climate events. This furthers limits investors’ ability to influence the direction and strategy of a public company. Like Division A, Division C of this bill has the potential to limit shareholder input on issues outside the traditional concept of ESG — and could prevent proposals on commonsense items like limiting excessive executive compensation, or providing benefits and raises for employees.
Furthermore, this bill would also gut the proxy advisory industry, which is made up of independent research firms that provide investors with advice and recommendations on how to best vote their shares at a company’s annual shareholders’ meeting.
I have put forth two amendments to H.R. 4790 that aim to push back on the bad aspects of this bill, which I encourage the committee to make in order. The first expresses a Sense of Congress that private funds—like Venture Capital funds—can offer grants to minority-owned businesses on account of trends showing they face inordinate barriers to accessing capital. The second would require public companies to disclose whenever they eliminate any employees or offices within the company tasked with enhancing the company’s commitment to diversity, equity, and inclusion.
The final provision I want to discuss in H.R. 4790 is Division D. This section would undermine the ability of the U.S. government to coordinate internationally, or take commonsense steps to address financial risks, like those posed by climate change. This extreme measure would even make it harder for our bank regulators to encourage banks to expand small business lending, and I urge you to make my amendment in order that would at least fix that.
Mr. Chairman, I think many Members on this Committee would say they are capitalists and believe in capitalism. But this bill couldn’t be more anti-capitalist. It takes away our investors’ say in the marketplace as well as their access to relevant—and critically important—market information. I urge all members to vote no on H.R. 4790, a dangerous bill that will set America’s capital markets back to an era where corporate insiders thrived in darkness and without any oversight—and when the enrichment of those at the very top was prioritized to the detriment of everyone else.
Thank you for the opportunity to testify. I would be happy to answer any questions you may have, and I yield back.
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