Bloomberg BNA’s Corporate Law & Accountability Report is available on the Corporate Law Resource Center. This news service keeps corporate practitioners informed of legal developments of...
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.
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.
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 email@example.com
To contact the editor responsible for this story: Yin Wilczek at firstname.lastname@example.org
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)