by Cydney Posner

Uh, no.  In a new CDI, Corp Fin tells us how not to identify proposals on proxy cards, particularly shareholder proposals. Rule 14a-4(a)(3) requires that the form of proxy “identify clearly and impartially each separate matter intended to be acted upon.”  But, when it comes to shareholder proposals, sometimes companies are, shall we say, a bit cryptic in “identifying” the proposal.  From time to time, companies may even identify the proposal as briefly as “Shareholder Proposal.”  So the question to the staff was this: just “how specifically must a company describe a Rule 14a-8 shareholder proposal on its proxy card?”

According to Corp Fin, the proxy card should clearly identify and describe the specific action on which shareholders will be asked to vote, whether the proposal is a management proposal or a shareholder proposal.  Aside from that prescription, Corp Fin answers this question by telling us what not to do.  For example, it’s not sufficient to describe a management proposal for a charter amendment to increase the number of authorized common shares as “a proposal to amend our articles of incorporation.”

SideBar: Presumably, the proposal must also indicate that the proposed charter amendment would increase the authorized common.  But does the description need to indicate the amount of the increase? That’s not addressed in the CDI, but can we infer from the absence of discussion of the issue that, in most cases, Corp Fin would not push the point that far?

Similarly, the staff indicates that it would not be acceptable to label a shareholder proposal to amend the bylaws to allow 10% holders to call a special meeting as “a shareholder proposal on special meetings.”  

Sidebar: Of course, it’s anyone’s guess how we fit all the necessary verbiage on the small and highly formatted proxy cards.

Corp Fin also gives us some other examples of what’s not ok under the rule, apparently drawn from real proxy cards:

  • A shareholder proposal on executive compensation;
  • A shareholder proposal on the environment;
  • A shareholder proposal, if properly presented; and
  • Shareholder proposal #3.


Posted by Cydney Posner