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By Yin Wilczek
Dec. 24 — After Whole Foods Market Inc.'s successful bid to omit a shareholder proponent's proxy access resolution from its proxy materials, other companies are submitting requests to the Securities and Exchange Commission staff asking for exclusion on the same grounds.
In a Dec. 18 no-action letter, Cabot Oil & Gas Corp. told the SEC Division of Corporation Finance that it may properly exclude a shareholder's proxy access resolution based on 1934 Securities Exchange Act Rule 14a-8(i)(9). The company said it intends to submit to a vote its own proposal allowing shareholders owning five percent or more of company stock for three years to place their director nominees on the company's proxy card.
Rule 14a-8(i)(9) allows companies to exclude proposals that directly conflict with one that they intend to submit to shareholders at the same meeting.
Similarly, Marathon Oil Corp. said in a Dec. 17 no-action request that it should be allowed to exclude a proponent's proxy access resolution, given that it has a conflicting proposal calling for proxy access for shareholders that hold five percent or more of company stock for at least five years.
Both requests involved proposals by New York City Comptroller Scott Stringer. In November, Stringer announced that he had submitted proxy access proposals to 75 companies on behalf of the New York City Pension Funds that suggested a three-percent/three-year threshold.
In a Dec. 24 e-mail, Stringer told Bloomberg BNA that the companies are employing a “calculated tactic” to deny shareholders “a fundamental right to hold directors accountable.”
“By proposing the illusion of proxy access, with ownership thresholds that the SEC has rejected as too high, their boards have demonstrated why long-term shareowners need meaningful proxy access,” Stringer said.
The SEC's federal proxy access rule—which was invalidated by the U.S. Court of Appeals for the District of Columbia in July 2011—also called for a three-percent/three-year threshold. Proposals with such thresholds garnered the greatest support from shareholders in the 2014 season.
In their no-action requests, Marathon Oil and Cabot Oil cited the SEC staff's Dec. 1 response to Whole Foods, in which it agreed that Whole Foods could exclude the proposal because it directly conflicted with one that the company was going to submit.
James McRitchie, the shareholder proponent in the Whole Foods action, Dec. 23 asked the SEC to review the staff response, saying it in effect limits shareholders' rights by not allowing them to vote on competing resolutions involving similar or related topics “solely because the proposals contain different terms or thresholds”.
A Whole Foods representative declined to comment on McRitchie's request for review.
Observers are expecting a big increase in proxy access proposals in the 2015 season, in part because of Stringer's initiative. Commentators previously suggested that Whole Foods' success in the no-action sphere will spur similar strategies by other companies, and it could take several years before shareholders and companies reach a happy compromise in proxy access thresholds.
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Cabot Oil's no-action request is available at http://www.sec.gov/divisions/corpfin/cf-noaction/14a-8/2014/nyccomptroller121814-14a8-incoming.pdf.
Marathon Oil's no-action request can be found at http://www.sec.gov/divisions/corpfin/cf-noaction/14a-8/2014/nycityemployee121714-14a8-incoming.pdf.
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