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By Che Odom
June 23 — General Mills Inc. stockholders won't get to weigh in on a resolution asking the company's board to evaluate options for selecting external auditors through a regular competitive process.
The Securities and Exchange Commission staff agreed June 17 with the maker of Cheerios and Betty Crocker mixes that it may exclude Qube Investment Management Inc.'s proposal from its proxy materials, which means that shareholders won't get to vote on the issue.
Qube's resolution is geared toward encouraging greater auditor independence, which it contends is compromised by long-standing engagement. In its April 7 proposal, Qube said regular market competition would “increase share value by increasing long-term audit quality, without an unjustified increase in audit cost.”
General Mills, which has had a decades-long relationship with KPMG LLP, petitioned the SEC's Division of Corporation Finance May 26 for approval to omit the resolution. The company argued that Qube didn't submit the necessary evidence to show it met ownership requirements for submitting a proposal.
Responding in a June 17 letter, the division said it wouldn't recommend enforcement action against the company if it excluded Qube's proposal on those grounds.
This is the first year that Qube has pushed the issue of auditor engagement, submitting proposals with 28 companies (23 CARE, 2/4/16). According to Bloomberg BNA's search of SEC filings, that initiative may be the largest effort in recent years to use shareholder proposals in an attempt to force companies to consider switching audit firms periodically.
Qube's resolution comes two years after the Public Company Accounting Oversight Board said it would no longer pursue rulemaking on a proposal that would set limits on the number of years an audit firm may engage with an issuer (12 CARE 185, 2/14/14).
To contact the reporter on this story: Che Odom in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Yin Wilczek at email@example.com
The SEC's letter is available at http://1.usa.gov/28UyH6L.
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