|
Developments
Overview
|
 What
is Rule 14a-8? From SLB 14
- Rule14a-8 provides an opportunity for a shareholder owning a relatively small amount of a company's securities to have his or her proposal placed alongside management's proposals in that company's proxy materials for presentation to a vote at an annual or special meeting of shareholders. It has become increasingly popular because it provides an avenue for communication between shareholders and companies, as well as among shareholders themselves. The rule generally requires the company to include the proposal unless the shareholder has not complied with the rule's procedural requirements or the proposal falls within one of the 13 substantive bases for exclusion described in the table below.
SLB
 SEC
held
open meeting
on 11.28.07 to address electronic shareholder forums and shareholder access
- Adopted amendments to Rule 14a-8 to clarify its longstanding interpretation of that rule
- Adopted amendments to proxy rules to facilitate the use of electronic shareholder forums
SEC held
open meeting
on 7.25.07 to address shareholder access and
other matters 
 SEC published two competing proposals, with
comments due by 10.02.07
- Shareholder proposals, disclosure about
shareholder proponents, shareholder communications and related matters
(shareholder access)
- Comments received are
available on SEC website
- SEC proposing release
34-56160
-
SEC proposing release
34-56161
SEC Opening Remarks
Commentary
- ISS
Corporate Governance Blog 7.31.07
- Speech
by SEC Commissioner 8.02.07
House Committee on Financial Services
Senate
Banking Committee
SEC_CODE_REF_0090001192884
- Senators urge SEC to delay vote
on shareholder access proposals
- Financial Week
article 11.01.07
There is a widespread assumption that having published the two proposals, the Commission has only a binary choice that we must adopt one of them, or do nothing. But in fact we may also adopt a rule that is different than either of those proposed. The only requirement is that the proposed rule, and the questions the agency has asked, provide fair notice to the public of what the Commission is contemplating and the issues involved. So long as the final rule or rules are a logical outgrowth of what was proposed, we are free to amend the proposals and to consider improvements that the public comment process has brought to our attention. Archive Summaries
|
Procedural Exclusions
Rule
14a-8 |
Description |
| (b) |
- Proponent must satisfy specified ownership requirements - (b)(1)
- Proponent must prove ownership - (b)(2)
|
| (c) |
- Limit on number of proposals
Limit of one proposal per
proponent per company per annual meeting
- Topic Page
|
| (d) |
- Limit on length of proposal
Proposal can't exceed 500
words
- Topic Page
|
| (e) |
- Deadline for submission
Proposals for a regularly scheduled
annual meeting must be received at the company's principal executive offices not
less than 120 calendar days before the release date of the previous year's
annual meeting proxy statement
- Topic Page
|
| (f) |
- Exclusion notice; Cure
Company can exclude proposal
if any of (b) to (e) aren't satisfied, but only after following specified
requirements for notice and cure
- Topic Page
|
| (g) |
- Exclusion - Burden of persuasion
Company has burden of
persuasion
- Topic Page
|
| (h) |
- Attendance at meeting
Proponent or a qualified
representative must attend the shareholder's meeting
- Topic Page
|
|
Also see SEC
recommendations:
SLB G |
| -- |
|
| |
Substantive Exclusions
Rule
14a-8(i) |
Description |
| (1) |
- State law
The proposal is not a proper subject for action by shareholders under the
laws of the jurisdiction of the company's organization
- Topic Page
|
| (2) |
- Violation of law
The proposal would, if
implemented, cause the company to violate any state, federal or foreign law to
which it is subject
- Topic Page
|
| (3) |
- Violation of proxy rules
The proposal or supporting
statement is contrary to any of the Commission's proxy rules, including
rule 14a-9, which prohibits materially false or misleading statements in proxy
soliciting materials
- Topic Page
|
| (4) |
- Personal grievance; special interest
The proposal relates to the
redress of a personal claim or grievance against the company or any other
person, or is designed to result in a benefit to the shareholder, or to further
a personal interest, which is not shared by the other shareholders at large
- Topic Page
|
| (5) |
- Relevance
The proposal relates to
operations that account for less than 5% of the company's total assets at the
end of its most recent fiscal year, and for less than 5% of its net earnings and
gross sales for its most recent fiscal year, and is not otherwise significantly
related to the company's business
- Topic Page
|
| (6) |
- Absence of power/authority
The company would lack the
power or authority to implement the proposal
- Topic Page
|
| (7) |
- Management functions
The proposal deals with a
matter relating to the company's ordinary business operations
- Topic Page
|
| (8) |
- Relates to an election
The proposal relates to an
election for membership on the company's board of directors or analogous
governing body
- Topic Page
|
| (9) |
- Conflicts with company's proposal
The proposal directly
conflicts with one of the company's own proposals to be submitted to
shareholders at the same meeting
- Topic Page
|
| (10) |
- Substantially implemented
The company has already
substantially implemented the proposal
- Topic Page
|
| (11) |
- Duplication
The proposal substantially
duplicates another proposal previously submitted to the company by another
shareholder that will be included in the company's proxy materials for the same
meeting
- Topic Page
|
| (12) |
- Resubmissions
The proposal deals with
substantially the same subject matter as another proposal or proposals that
previously has or have been included in the company's proxy materials within a
specified time frame and did not receive a specified percentage of the vote
- Topic Page
|
| (13) |
- Amount of dividends
The proposal relates to
specific amounts of cash or stock dividends
- Topic Page
|
|
Adapted from SLB 14 B.1 |
|
Also see SEC
recommendations:
SLB G |
Deadlines
|
Proponent's submission |
- Deadline for a proponent to
submit a proposal
- Proposals for a regularly scheduled annual meeting must be received at the
company's principal executive offices not less than 120 calendar days before the release date of the previous year's annual meeting proxy statement
- Both the release date and the deadline for receiving rule 14a-8 proposals for
the next annual meeting should be identified in that proxy statement
|
|
Company seeks to exclude |
- If
a company seeks to exclude a proposal because the shareholder has not complied
with an eligibility or procedural requirement of rule 14a-8, generally, it must
notify the shareholder of the alleged defects within 14 calendar days of receiving the proposal
- Proponent response to notice
of defect
- The
shareholder then has 14 calendar days after receiving the notification to respond
- Failure to cure the defects or respond
in a timely manner may result in exclusion of the proposal
|
- If a company
intends to exclude a proposal from its proxy materials, it must submit its
no-action request to the SEC no later than 80 calendar days before it files its definitive proxy statement
and form of proxy with the SEC unless it demonstrates "good cause" for missing
the deadline
- In addition,
a company must simultaneously provide the shareholder with a copy of its
no-action request
|
|
Proponent revisions |
- SEC
will afford the shareholder seven calendar days from the date of receiving the SEC's response
to provide the company with the revisions
- Also see SLB 14 §B.12.a and B.12.b
- Proponent response to notice
of defect
|
|
Company statement in opposition |
- Statement in opposition -
Defined
- If
a proposal appears in a company's proxy materials, the company may elect to
include its reasons as to why shareholders should vote against the proposal.
This statement of reasons for voting against the proposal is commonly referred
to as a statement in opposition
- The
company is required to provide the shareholder with a copy of its statement in
opposition no later than 30 calendar days before it files its definitive proxy statement
and form of proxy
- If SEC's no-action response provides for
shareholder revision to the proposal or supporting statement as a condition to
requiring the company to include it in its proxy materials, the company must
provide the shareholder with a copy of its statement in opposition no later than five calendar days after it receives a copy of the revised proposal
|
|
Adapted from
SLB 14
B.3 |
Submission details
|
SEC
addresses
Use
of fax numbers
Company
copying relevant correspondence
- SLB 14C §G
- SLB 14 specifically indicates that the staff will
look to the qualifications of attorneys giving legal opinions in support of
exclusions, and in particular will look to where the lawyer is licensed to
practice. Companies incorporated in Delaware should engage Delaware counsel to
render any opinions dealing with the Delaware General Corporation Law. General
Dynamics Corp. 3.05.01
- Proposal excludable as improper under Delaware
law when supported by an opinion of Delaware counsel
|
|
