NYC Comptroller goes straight to court to compel inclusion of shareholder proposal—is this the Comptroller’s new normal?
Post-shutdown, the SEC is starting to catch up on no-action requests to exclude shareholder proposals, posting several new entries at the end of last week. While most of the responses reflected withdrawals of requests in light of withdrawal of the subject proposal, one of the more interesting withdrawal letters relates to a decision to include a shareholder proposal. The proposal, submitted by the New York City Employees’ Retirement System and other pension funds overseen by NYC Comptroller Scott Stringer, sought to have TransDigm Group Incorporated, a manufacturer of aerospace components, adopt a policy related to climate change. After the company sought no-action relief from the SEC staff—and notably well before the government shutdown and before the SEC had even responded to the company’s request—the proponent pension funds filed suit in the SDNY seeking to enjoin the company from soliciting proxies without including the shareholder proposal and declaratory relief that the exclusion of the proposal violated Section l4(a) and Rule l4a-8. Will the Comptroller use the same tactic of circumventing the traditional SEC process and commencing litigation for any proposal the pension funds submit in the future? Will going straight to court be the new normal?
In 2014, NYC Comptroller Scott Stringer, who oversees the NYC pension funds, submitted proxy access proposals to 75 companies—and ignited the push for proxy access at public companies across the U.S. The form of proxy access proposed in this first phase of the Boardroom Accountability Project was very similar to the form of proxy access mandated under the SEC’s rules that were overturned in 2011, requiring an eligibility threshold of 3% ownership for three years, with shareholders having the right to nominate up to 25% of the board. (See this PubCo post and this PubCo post.) It has been reported that, of the 75 proposals submitted by the NYC comptroller in 2014, 63 went to a vote, with average support of 56% and 41 receiving majority support. In 2015, Stringer submitted more proxy access proposals. Notably, until Stringer’s initiative, private ordering for proxy access had not gathered much steam; only six companies had adopted proxy access. Stringer’s office reports that, today, more than 425 companies, including over 60% of the S&P 500, have enacted proxy access bylaws. Now, the NYC Comptroller’s Office, leveraging the success of its proxy access campaign and the “powerful tool” it represents to “demand change,” has announced the Boardroom Accountability Project 2.0, which will focus on corporate board diversity, independence and climate expertise. Will Project 2.0 have an impact comparable to that of the drive for proxy access?
by Cydney Posner In case you missed it, Gretchen Morgenson’s column in the Sunday NYT railed against virtual-only annual meetings, which according to her data (provided by Broadridge), have increased in number from 21 in 2011 to 154 in 2016. And joining in the condemnation of the practice was NYC […]
by Cydney Posner As noted in TheCorporateCounsel.net blog, New York City Comptroller Scott Stringer has once again submitted, on behalf of a number of NYC pension funds, a raft of shareholder proposals for proxy access as part of the Comptroller’s continuing Boardroom Accountability Project. The list of the 72 companies targeted this […]