[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[S. 2829 Introduced in Senate (IS)]

<DOC>






117th CONGRESS
  1st Session
                                S. 2829

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

                           September 23, 2021

   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 
2021''.

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 corporations' charters and 
        bylaws, 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 non-
                        governmental organizations which advocate for 
                        changes political or social policy through 
                        issuers, other activists affiliated with such 
                        actors, and activist investors which advocate 
                        for changes in corporate policy primarily 
                        unrelated to the pecuniary interest of the 
                        issuer; and
                            (ii) conceding to the demands of such 
                        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 non-commercial 
        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, either--
                    ``(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 have continuously owned 
                not less than--
                            ``(i) $2,000 in market value of the 
                        issuer's securities for at least three years;
                            ``(ii) $15,000 in market value of the 
                        issuer's securities for at least two years; or
                            ``(iii) $25,000 in market value of the 
                        issuer's securities for at least one 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) Non-pecuniary investment entity.--The term `non-
        pecuniary 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 such company or fund for which such 
                activity occurs with respect to such 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 such activism is facially 
                unrelated to the pecuniary interest of the issuers to 
                which such 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 2021, 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, which shall include 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, which shall include 
        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 non-pecuniary investment entity; or
                            ``(ii) inclusion of the securities of the 
                        issuer in indexes created by index providers 
                        that select those indexes on a primarily non-
                        pecuniary basis or that include such securities 
                        in any index on a primarily non-pecuniary 
                        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 non-pecuniary 
        investment entity or any affiliate of a non-pecuniary 
        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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