When we last left the saga of proxy access, we had just started a new chapter on so-called “fix-it” shareholder proposals—efforts to revise existing proxy access bylaws to make them more “shareholder-friendly.” You might recall that, in 2016 and 2017, John Chevedden et al. submitted a slew of fix-it proposals that requested amendments to proxy access bylaws to raise the cap on the number of shareholders that could aggregate their shares to reach the necessary 3% ownership level. Target companies, in turn, submitted no-action requests seeking to exclude those proposals on the basis that they had already been “substantially implemented” under Rule 14a-8(i)(10). In response to the requests for relief, the SEC staff took a uniform no-action position allowing exclusion of these fix-it proposals. But the proponents were persistent and, in 2017, submitted to H&R Block a different formulation of a fix-it proposal that requested only one change — elimination of the cap on shareholder aggregation to achieve the 3% eligibility threshold, as opposed to simply raising the cap to a higher number. This time, the staff rejected H&R Block’s no-action request. In essence, it appears that the staff believes that a lower cap on aggregation could “substantially implement” a higher cap, but the removal of a cap entirely is a different animal that could not be substantially implemented by the lower cap. (For more history on these fix-it proposals, see this PubCo post.) This proxy season, the proponents have latched onto—and even expanded—the new formulation and have continued to find success in preventing exclusion.
In 2016, the AFL-CIO submitted several shareholder proposals designed to curb the impact of stock buybacks on executive compensation. (See this PubCo post.) The question at the time was whether we would see many more of these proposals. However, amid significant media and academic criticism, as well as relatively high stock valuations, the levels of stock buybacks declined, and the anticipated wave of proposals on buybacks did not materialize. However, the new tax act is expected to trigger a new spike in the levels of stock buybacks. (See this MarketWatch article.) Perhaps with that in mind, one of the most prolific proponents of shareholder proposals has submitted a proposal to eliminate the impact of stock buybacks in determining executive compensation. Will these proposals now become a thing?
Summarized below are some of the highlights of the 2017 PLI Securities Regulation Institute panel discussions with the SEC staff (Michele Anderson, Wesley Bricker, Karen Garnett, William Hinman, Mark Kronforst, Shelley Parratt, Ted Yu), as well as a number of former staffers and other commentators. Topics included the Congressional and SEC agendas, fresh insights into the shareholder proposal guidance, as well as expectations regarding cybersecurity, conflict minerals, pay ratio disclosure, waivers and many other topics.
It ain’t over till it’s over, as they say. You may have thought that, after the series of staff no-action positions allowing exclusion of so-called “fix-it” proposals during the last proxy season, we had seen the last of them. If so, you would be forgetting how persistent (or relentless, depending on your point of view) these proponents are. And this time, the staff has rejected the no-action request of H&R Block—once again the unfortunate trailblazer— which had sought exclusion of another proxy access fix-it proposal—this time to eliminate the cap on shareholder aggregation to achieve the 3% eligibility threshold—from the prolific John Chevedden et al. Given the result, you can expect to see more of this form of fix-it proposal next proxy season.
by Cydney Posner The SEC has posted a number of additional Corp Fin responses to requests for no-action, as well as to requests for reconsideration of previous denials of relief, regarding shareholder proposals to amend proxy access bylaws, so-called “fix-it” proposals. In all cases, the companies argued that they should […]
by Cydney Posner What’s the latest on proxy access proposals? As you may recall, the line drawn so far by Corp Fin has been that, where the shareholder proposal related to initial adoption of proxy access, Corp Fin has continued to grant no-action relief and permit exclusion of proxy access proposals as […]
Corp Fin Staff grants no-action relief allowing exclusion of shareholder proposals for proxy access under Rule 14a-8(i)(10)
by Cydney Posner Now that Corp Fin has issued Staff Legal Bulletin 14H providing guidance that, for most practical purposes, eliminates the availability of Rule 14a-8(i)(9) (see this PubCo post) to exclude shareholder proposals that conflict with management proposals, there has been substantial speculation about the contours of Rule 14a-8(i)(10), the exclusion for proposals […]