Shareholder Votes Show Support for Stronger Safeguards Against Insider Trading

New York, NY – Shareholders at the pharmaceutical firm McKesson Corporation voted 49.5 percent of shares in support of a shareholder resolution aimed at strengthening protections against insider trading. Together with a similar vote at Abbott Laboratories, the vote shows robust investor appetite for stronger safeguards to address loopholes in current rules and practices, as the Securities and Exchange Commission (SEC) is considering new rules on the topic.

The resolution, submitted by New York City Comptroller Brad Lander on behalf of the New York City Employees’ Retirement System, the Teachers’ Retirement System, the New York City Fire Pension Fund and the New York City Board of Education Retirement System, recommended that the company’s board adopt a policy to require Form 8-K disclosure when its section 16 insiders adopt, modify or cancel a Rule 10b5-1 trading plan.

“Shareholders expect companies and regulators to take a serious look at any loopholes that may permit insider trading. Investors are making it clear that they want stronger safeguards to ensure executives do not leverage private information for personal benefit,” said NYC Comptroller Brad Lander.

10b5-1 plans are stock trading plans that allow executives to sell stock to diversify their holdings to meet legitimate personal needs without fear of prosecution for insider trading.  Investors have legitimate concerns that these plans open the door to misuse and academic research has shown that executives, including at McKesson, have engaged in opportunistic trades that allowed them to save millions of dollars by selling large chunks of shares under a 10b5-1 plan just before a stock started to underperform. For example, former McKesson CEO John Hammergren avoided losing $4.5 million by adopting a Plan on September 18, 2017 that allowed him to sell $91 million in stock from September 22 to 29, the last six trading days of the third quarter. McKesson’s share price fell 5.5% on October 27, 2017, after it announced disappointing third quarter 2017 earnings. After former Abbott CEO Miles White adopted a plan on March 15, 2019 and sold $47 million in stock the next day, Abbott’s share price fell more than 7% in the 30 days following the sale.

The requested disclosure would complement rules proposed by the SEC in December 2021 to enhance disclosure requirements and investor protections against insider trading. In March, Comptroller Lander submitted a comment letter to the SEC recommending that the Commission strengthen its proposed rules currently under consideration by requiring Form 8-K disclosure as proposed to McKesson’s shareholders. The McKesson vote demonstrated strong investor support for the additional disclosures requested in the shareholder proposal.

The broad support from McKesson shareholders follows the strength of another 10b5-1 proposal at Abbott Laboratories, where a shareholder resolution also introduced by the NYC Comptroller on behalf of the four pension systems received 49 percent of the vote from shareholders in May. The vote on that proposal, which requested Form 8-K disclosure and many of the other safeguards contained in the proposed SEC rules demonstrated strong investor support for the additional safeguards and transparency contained in the SEC’s proposed rules.

The shareholder resolution proposed at Abbott Laboratories, which was submitted before the SEC proposed its new rules, would address many of the red flags associated with 10b5-1 plans while the McKesson proposal, submitted after the SEC’s rule proposal, addresses the additional need for timely disclosure of plan adoption, modification or cancellation.

Comptroller Lander is the custodian and a trustee of the New York City Employees’ Retirement System, the New York City Teachers’ Retirement System, the New York City Fire Pension Fund, and the New York City Board of Education Retirement System.

Trustees of the pension fund board bringing this resolution are:

New York City Employees’ Retirement System (NYCERS): Mayor Eric Adams’ Representative Preston Niblack, Chair; New York City Comptroller Brad Lander; New York City Public Advocate Jumaane Williams; Borough Presidents: Mark Levine (Manhattan), Donovan Richards (Queens), Antonio Reynoso (Brooklyn), Vito Fossella (Staten Island), and Vanessa L. Gibson (Bronx); Henry Garrido, Executive Director, District Council 37, AFSCME; Tony Utano, President Transport Workers Union Local 100; and Gregory Floyd, President, International Brotherhood of Teamsters, Local 237.

Teachers’ Retirement System (TRS): Mayor Eric Adams’ Representative Bryan Berge; New York City Comptroller Brad Lander; Chancellor’s Representative, Russell Buckley, New York City Department of Education; and Debra Penny (Chair), Thomas Brown and David Kazansky, and all of the United Federation of Teachers.

New York City Fire Pension Fund (Fire): Mayor Eric Adams’ Representative Bryan Berge; New York City Comptroller Brad Lander; Acting New York City Fire Commissioner Laura Kavanagh (Chair); New York City Finance Commissioner Preston Niblack; Andrew Ansbro, President, Robert Eustace, Vice President, Edward Brown, Treasurer, and Eric Bischoff, Staten Island Representative and Chair, Uniformed Firefighters Association of Greater New York; Liam Guilfoyle, Captains’ Rep.; Paul Mannix, Chiefs’ Rep., and Christopher Jensen, Lieutenants’ Rep., Uniformed Fire Officers Association; and Peter Devita, Marine Engineers Association.

Board of Education Retirement System (BERS): Schools Chancellor David C. Banks, Represented by Ben Schanback; New York City Comptroller Brad Lander’s Representative Alison Hirsh; Mayoral: Vasthi Acosta, Gregory Faulkner, Dr. Angela Green, Kyle Kimball, Anthony Lopez, Alan Ong, Gladys Ward, Karina Taveras; Thomas Sheppard (CEC); Geneal Chacon (Bronx), Tazin Azad (Brooklyn), Kaliris Salas-Ramirez (Manhattan), and Jaclyn Tacoronte (Staten Island); and employee members John Maderich of the IUOE Local 891 and Donald Nesbit of District Council 37, Local 372.

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