Safeguarding Investors' Legal Rights

For over a decade, the Council of Institutional Investors has stood firmly against the use of forced arbitration clauses in corporate charters and bylaws. These provisions undermine shareholder rights by restricting access to judicial forums.
 
In October 2012, CII members approved the adoption of section 1.9, Judicial Forum, of our Corporate Governance Policies, that states: “Companies should not attempt to bar shareowners from the courts through the introduction of forced arbitration clauses.”

The supporting statement for this position identifies five key concerns with arbitration:

• The process for discovering evidence may be limited in comparison with a judicial proceeding. 
• The right to appeal is rare.
• Arbitration awards are not directly enforceable and may require judicial remedy to confirm the award.
• Arbitration may not allow similarly-impacted parties to organize as a class.
• Disputes that go to arbitration do not necessarily become part of the public record.

Importantly, CII's policy opposes involuntary arbitration between a company and a shareholder. The Council's policy takes no stance on voluntary arbitration agreements, whether reached between two companies, between a company and a service provider, or between a company and a shareholder.

CII has backed this position with consistent advocacy:

• Letters to SEC leadership (2013, 2018, 2019, & 2025) urging vigilance against arbitration clauses in corporate governing documents
• Outreach to Congress, including a letter to Sen. Patrick Leahy in 2013
• Support for companies resisting shareholder proposals to adopt arbitration bylaws (e.g., Intuit in 2020)
• Dedicated teleconferences: “Forced Arbitration and IPOs” (Feb. 2018) and "The Great Debate - Permit Mandatory Arbitration?" (Dec. 2018). CII Members can access recordings of both of these teleconferences in CII's Media Archive.

CII will host a webinar on this topic, “The SEC’s Policy Statement on Mandatory Arbitration and its Implications for Institutional Investors,” on December 4, 2025. The new policy statement, which is inconsistent with CII membership-approved policy, replaces a long-standing Commission practice that discouraged initial public offerings from including mandatory arbitration provisions in their governing documents.
 
In this webinar, Brian V. Breheny, a partner at Skadden, Arps, Slate, Meagher & Flom who focuses on SEC reporting and compliance, mergers and acquisitions, capital markets and corporate governance, and Ann Lipton, a professor of law and Laurence W. DeMuth Chair at the University of Colorado Boulder, will provide some background and an overview of the policy statement and discuss its potential impact on long-term institutional investors. 
 
These resources reflect our long-standing commitment to protecting shareholder access to the courts and opposing mechanisms that erode investor protections. 

For a detailed listing of CII’s advocacy efforts, visit our correspondence page, and CII’s member-approved Corporate Governance Policies, or contact us at content@cii.org.