Rule text

• If I have complied with the procedural requirements, on what other bases may a company rely to exclude my proposal?
  
  ***
  
  5. Relevance:
  
  If the proposal relates to operations which account for less than 5 percent of the company's total assets at the end of its most recent fiscal year, and for less than 5 percent of its net earning sand gross sales for its most recent fiscal year, and is not otherwise significantly related to the company's business;
                                                                    

This exclusion basis has seen increasingly limited utility in recent years. The 'otherwise significantly related" language has been interpreted broadly, so as to deny exclusion of matters that had anything more than a de minimis impact on the company

From 11.01.04 through 8.10.07, only ten requests for no-action letters cited Rule 14a-8(i)(5) as a basis for excluding a shareholder proposal

Cases

• At least one district court has reinforced the weight of this "not significantly related to company business" prong of the exclusion ground. Lovenheim v. Iroquois Brands, 618 F. Supp. 544 Dist. D.C. 1985 shareholder proposal regarding cruelty of force-feeding geese to produce French pat could not be omitted because of ethical and social significance, despite the fact that pat sales fell below 5% threshold

Override mechanism

• SEC proposed permitting 3% of a companys shareownership to override the "ordinary business" exclusion and the "relevance" exclusion, paragraphs (7) and (5) under Question 9.

• Final release 34-40018  1998 VI

Change to relevance standard

• SEC proposed proposed to revise the rule to apply a purely economic standard

• Final release 34-40018  1998 VI

1998 rule changes

• All of Rule 14a-8 was rewritten in a Plain English Q&A format
• Former Rule 14a-8(c)(5) was redesignated as
  Rule 14a-8(i)(5)

• Final release 34-40018 II
• Proposal release 34-39093 III.A

• Substantive changes were proposed to be made to former
  Rule 14a-8(c)(5) but weren't adopted

• Final release 34-40018 §VI
• Proposal release 34-39093 III.C

For prior versions of the rule, see
Rule 14a-8 Historic Rule Changes

For summary and SEC releases, see
Rule 14a-8 Regulatory History and SEC Releases

Not excludable

• Beazer Homes USA  11.30.07

• Indiana State District Council of Laborers and HOD Carriers Pension Fund
• Report on the company's mortgage practices
• Not excludable per Rule 14a-8(i)(7) nor Rule 14a-8(i)(5)

• CONSOL Energy  3.23.07

• ...A shareholder proposal, which requests that an independent committee of this company's board prepare a report on how the company is responding to rising regulatory, competitive and public pressure to significantly reduce carbon dioxide and other greenhouse gas emissions, may not be omitted from the company's proxy material under rule 14a-8(i)(5) or (i)(6)

Shareholder Access - Rule 14a8