Proxy Access Tops SEC's Shareholder Proposal Relief Process

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By Che Odom

May 12 — Proxy access—a mechanism that facilitates stockholders' nomination of corporate directors—was the top matter that companies sought to keep from a shareholder vote this year.

According to data compiled by Bloomberg BNA's Corporate & Transactional editorial team, from Jan. 1 to May 12, the Securities and Exchange Commission staff responded to 214 letters from companies seeking to exclude shareholder proposals from their proxy materials.

Of the 214 requests, 49 concerned proxy access, 34 related to environmental issues and 29 addressed human rights or social issues.

Proxy access proposals call on corporations to allow shareholders to nominate their own board candidates on the company's ballot.

“It's hardly surprising that proxy access proposals have drawn more no-action letters than usual this year—since there are many of them, and it's a relatively new topic,” James Copland, director of legal policy and a senior fellow at the Manhattan Institute for Policy Research, told Bloomberg BNA.

The Bloomberg BNA review also found that the SEC staff sided with the overwhelming majority of companies that sought to omit access proposals from their proxies (89 CARE, 5/9/16).

During the no-action process, companies ask the SEC staff whether they may exclude a particular shareholder resolution from their proxy materials, preventing it from going before stockholders for a vote. The 1934 Securities Exchange Act provides several bases upon which the companies can ask for relief. The staff concurrence is informal—only courts such as federal district courts can decide whether companies must include the proposal in their proxies.

Adoptions Increase

More than 200 companies have adopted proxy access bylaws since 2014, when the New York City pension funds embarked on an initiative to push the director-nomination mechanism through shareholder resolutions (12 CARE, 1/20/16).

This year, individual proxy access proponents began filing more proposals with multiple companies, Copland said. Individual proponents are more likely to make technical errors than large public-employee pension funds, which means more requests by companies for a no-action determination, he said.

“Overall, with the exception of an increase in proxy access proposals, the types of proposals we've seen in 2016 are similar to those we've seen in the past,” said Copland, who tracks shareholder activism trends.

Green Trend

Environmental proposals continue to be one of the most commonly introduced class of proposals, so it isn't surprising they would draw many no-action requests, Copland continued.

The next-most-common class of proposal involves political spending or lobbying, Copland said. These resolutions “have been around for some time” and are identical to those in previous years, which makes them less likely to face a challenge by a company unless they are technically deficient, he said.

Copland added that similar to executive compensation-related proposals, proposals on human rights “may draw more no-action requests because they may involve ordinary business issues or other substantive reasons for exclusion.”

Meanwhile, the breadth of topics addressed by proposals has changed significantly in the last several years, said Elizabeth A. Ising, a partner at Gibson, Dunn & Crutcher LLP and co-chair of the firm's securities regulation and corporate governance practice.

Two of the most popular topics this year are proxy access and disclosure of political contributions, Ising said. “Shareholder proposals on these subjects were rare a decade ago and in recent years received increasingly high votes,” she told Bloomberg BNA.

To contact the reporter on this story: Che Odom in Washington at

To contact the editor responsible for this story: Yin Wilczek at

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