| Release No. 34-22625 Release No. 35-23904 Release No. IC-14795 Nov. 14, 1985
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 Table of Contents
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I. Background
Rule 14a-8 governs the inclusion of shareholder proposals in the proxy statements distributed to security holders by registrants subject to the Commissions proxy rules under the Exchange Act. Prior to August 1983, paragraph (c)(12) of the rule provided that a registrant could omit from its proxy material any shareholder proposal substantially the same as a proposal previously included in the registrants proxy material for a meeting of security holders held within the preceding 5 calendar years, where the proposal:
1. if submitted once during such preceding period, received less than 3 percent of the total number of votes cast in regard thereto;
2. if submitted twice during the period, at its second submission received less than 6 percent of the total number of votes cast in regard thereto; or
3. if submitted three or more times during the period, at its most recent submission received less than 10 percent of the total number of votes cast in regard thereto.
On August 16, 1983, the Commission adopted a number of amendments to Rule 14a-8, including amendments to paragraph (c)(12) of the rule. 1 These amendments became effective January 1, 1984. Rule 14a-8(c)(12) was amended to apply to shareholder proposals relating to "substantially the same subject matter" as proposals previously submitted to security holders in a registrants proxy material. The rule also was revised to increase the threshold percentages for resubmission from 3 percent to 5 percent for proposals submitted only once previously, and from 6 percent to 8 percent for proposals twice previously submitted. The percentage required for shareholder proposals previously submitted three or more times remained the same.
On December 19, 1984, several shareholder proponents filed suit in the United States District Court for the District of Columbia, seeking to have the higher threshold percentage tests vacated and the lower percentage requirements previously in effect reinstated. 2 On September 13, 1985, the district court granted the plaintiffs motion for summary judgment. The court issued an order vacating the higher percentage thresholds then in effect under Rule 14a-8(c)(12) and directing the Commission to reinstate the percentage thresholds in effect prior to January 1, 1984.
II. Discussion of Reinstated Rule 14a-8
In accordance with the order of the district court, the threshold percentage tests in effect under Rule 14a-8(c)(12) prior to January 1984 are hereby reinstated. Accordingly, the rule provides that a proposal will be eligible for resubmission if it receives a 3 percent vote the first time it is included in a registrants proxy material, or a 6 percent vote the second time it is included. The Commission will monitor the effect of the reinstated rule during this proxy season and determine thereafter whether it is appropriate to publish for public comment further changes in the threshold percentage tests for resubmission of shareholder proposals under Rule 14a-8(c)(12).
It should be noted in connection with the change in the Rule 14a-8(c)(12) percentages that pursuant to Section 23(a)(1) of the Exchange Act, registrants who had previously omitted shareholder proposals in good faith in conformity with the vacated percentages while they were in effect are not subject to Exchange Act liability for such action. Further, the staffs interpretive views under Rule 14a-8(c)(12) will remain unchanged except as to the threshold percentage tests.
III. List of Subjects in 17 CFR Part 240
Reporting and recordkeeping requirements, Securities.
IV. Statutory Authority and Findings
The Commission hereby adopts the amendments to Rule 14a-8 pursuant to its statutory authority under Sections 14(a) and 23(a) of the Securities Exchange Act of 1934, Sections 12(e) and 20(a) of the Public Utility Holding Company Act of 1935, and Sections 20(a) and 38(a) of the Investment Company Act of 1940. As required by Section 23(a) of the Exchange Act, the Commission has considered the impact that this rulemaking action would have on competition and has concluded that the amendments would impose no significant burden on competition not necessary or appropriate in furtherance of the purpose of the Exchange Act.
V. Text of Amendments
In accordance with the foregoing, Title 17, Chapter II of the Code of Federal Regulations is amended as follows:
Part 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 1934
1. The authority citation for Part 240 continues to read as follows: (Citations before * * * indicate general rulemaking authority). Authority: Sec. 23, 48 Stat. 901, as amended 15 U.S.C. 78w. * * * §240.14a-8 also issued under Section 14, 15 U.S.C. 78n.
2. In §240.14a-8, paragraphs (c)(12)(i) and (ii) are revised to read as follows:
§240.14a-8. Proposals of security holders.
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(c) * * *
(12) * * *
(i) If the proposal was submitted at only one meeting during such preceding period, it received less than three percent of the total number of votes cast in regard thereto; or
(ii) If the proposal was submitted at only two meetings during such preceding period, it received at the time of its second submission less than six percent of the total number of votes cast in regard thereto; or
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By the Commission.
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