Companies that have long battled the prolific John Chevedden group on corporate governance shareholder proposals, as first noted on theCorporateCounsel.net proxy season blog, may be heartened to hear — or maybe not—that some members of the group are changing their focus.
In past few years, after Corp Fin issued Staff Legal Bulletin 14H redefining the meaning of “direct conflict” under the Rule 14a-8(i)(9) exclusion for “conflicting proposals,” the staff has continued to fill in the outline of what works and what doesn’t work under the new interpretation of the exclusion. In American Airlines Group (avail. April 2, 2018), the staff concluded that the approach taken by the company was coloring outside the lines and denied no-action relief.
This proxy season, after the Corp Fin staff permitted AES Corporation to exclude a shareholder proposal on the basis of Rule 14a-8(i)(9)—the exclusion for a proposal that directly conflicts with a management proposal—the Council of Institutional Investors sent a letter to William Hinman, director of Corp Fin, raising objections to the staff’s treatment of the proposal. (See this PubCo post.) The proposal, submitted by John Chevedden, had sought to reduce the threshold required for shareholders to call a special meeting from 25% to 10%. In its letter, CII charged that AES, by including in its proxy statement a conflicting management proposal to ratify the existing 25% threshold, was “gaming the system” and urged the SEC to revisit, once again, its approach to Rule 14a-8(i)(9). But what would be the impact of the CII letter? Would the CII letter induce the staff to revisit its prior position on the exclusion? Now, Corp Fin has issued a new no-action letter, in this instance to Capital One, once again allowing a company, following the same approach as in AES, to exclude a proposal that sought to reduce the special meeting threshold from 25% to 10% on the basis of Rule 14a-8(i)(9)—but with a twist. The question is: Is that the end of the story?
The Council of Institutional Investors has sent a letter to William Hinman, director of Corp Fin, raising objections to the staff’s treatment of a recent shareholder proposal. The staff permitted the company, the AES Corporation, to exclude a shareholder proposal submitted by John Chevedden that sought to reduce the threshold required for shareholders to call a special meeting from 25% to 10%. The basis for exclusion was Rule 14a-8(i)(9), which allows a shareholder proposal to be excluded if it directly conflicts with a management proposal to be submitted for a vote at the same shareholders meeting. In its letter, CII charged the company with “gaming the system to exclude a vote on a legitimate proposal that receives substantial shareholder support when it is voted on at other companies – to reduce the threshold for calling a special meeting,” and urged the SEC to revisit, once again, its approach to Rule 14a-8(i)(9).
What’s next for the House after taking on Dodd-Frank in the Financial CHOICE Act? Apparently, it’s time to revisit SOX. The Subcommittee on Capital Markets, Securities, and Investment of the House Financial Services Committee held a hearing earlier this week entitled “The Cost of Being a Public Company in Light of Sarbanes-Oxley and the Federalization of Corporate Governance.” During the hearing, all subcommittee members continued bemoaning the decline in IPOs and in public companies, with the majority of the subcommittee attributing the decline largely to regulatory overload. A number of the witnesses trained their sights on, among other things, the internal control auditor attestation requirement of SOX 404(b). Is auditor attestation, for all but the very largest companies, about to hit the dust?
by Cydney Posner Below are some highlights (from my notes) of the PLI Securities Regulation Institute panel discussions Thursday and Friday with the Corp Fin staff (Keith Higgins, Shelley Parratt, David Fredrickson, Michele Anderson, Karen Garnett) as well as a number of some former staffers, plus some additional discussion from […]
Corp Fin issues new SLB providing guidance on Rule 14a-8 exclusions for “conflicting proposals” and “ordinary business”
by Cydney Posner Corp Fin today posted Staff Legal Bulletin 14H providing guidance on two key issues regarding shareholder proposals under Rule 14a-8: the scope and application of Rule 14a-8(i)(9) (the exclusion for conflicting proposals); and the scope and application of Rule 14a-8(i)(7) (the exclusion for ordinary business) in light of Trinity […]
by Cydney Posner Today, at a meeting of the SEC’s Investor Advisory Committee, the committee heard various updates regarding proxy season, shareholder rights and related matters. Pat McGurn of ISS discussed the past proxy season, which he viewed as “one of the strangest” ever. Why strange? Because of the impact […]
SEC Chair White spills the beans on proposal for universal proxies, hints about the exclusion for conflicting shareholder proposals and discusses other proxy-related matters
by Cydney Posner Today, in a speech to the Society of Corporate Secretaries and Governance Professionals, SEC Chair May Jo White discussed four proxy-related issues that have recently created tension between companies and their shareholders: the concept of a universal proxy ballot; shareholder proposals; the delivery of preliminary proxy […]
White shares observations on shareholder activism, the shareholder proposal process and fee-shifting bylaws
by Cydney Posner Today, SEC Chair Mary Jo White spoke at Tulane’s Corporate Law Institute, sharing her observations on the current state of shareholder activism, the shareholder proposal process and fee-shifting bylaws. The common theme: her aversion to gamesmanship and close-minded, reflexive behavior on all sides, which, she believes, can […]