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Management functions
Rule 14a-8(i)(7)
Overview
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 Background
- In an effort to establish some useful guidelines,
the May 1998 adopting release for Rule 14a-8 specifically stated that it is
likely that the "social policy" concerns relevant to analyses under this rule
will evolve over time and that staff positions are likely to change as that
evolution occurs. In addition, the release indicated that the staff would follow
a case-by-case analytical approach applying two central considerations
- First, certain matters are so fundamental to
managements ability to run a company that they could not reasonably be subject
to direct shareholder oversighta social concern must be sufficiently
transcendent to offset this principle
- Second, a proposal cannot seek to micro-manage a
companys business
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
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Regulatory History
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1998
rule changes
- All of Rule 14a-8 was rewritten in a Plain
English Q&A format
- Former Rule 14a-8(c)(7) was redesignated as
Rule 14a-8(i)(7)
- Substantive changes were also made,
as the SEC reversed its Cracker Barrel policy
See "Cracker Barrel" immediately below
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
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Cracker Barrel
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Cracker
Barrel
no-action letter 1992
- Text
10.13.92
- SEC changed its policy on what was a
socially significant matter and refused to require the inclusion of a proposal
relating to alleged discriminatory employment practices
- Reversed SEC's prior "facts and circumstances"
approach to the exclusion of employment-related proposals under Rule 14a-8(7)
- Instead, established a bright-line approach
whereby all employment-related shareholder proposals raising significant social
policy issues were excludable
Ensuing
litigation 1994-1995
- Held that the SEC could not change established
policy through the no-action letter process
- Second Circuit
reversed, upholding the SEC, taking the position that no-action letters aren't precedential
- In a companion case, the court not only affirmed
the right of either party to question no-action positions in court, but also
allowed attorneys fees based on a theory that the action was taken to protect
all shareholder rights
SEC
reverses itself 1998
- SEC returns to its facts and circumstances
approach
Commentary
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Apache Corporation Cracker Barrel revisited
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Apache
no-action letter 2008
- NYCERS proposal requests that management
implement equal employment opportunity policies - based on list of 10 principles
- to avoid discrimination based on sexual orientation or gender identity
- SEC granted no-action relief based on "ordinary
business' grounds for exclusion, noting that some of the principles relate to
ordinary business operations
Ensuing
Litigation 2008
- Complaint requests declaration that it properly
excluded NYCERS proposal in reliance on Rule 14a-8(i)(7)
- Motion for temporary restraining order was
denied
- Motion for declaratory judgment was granted
pursuant
to Memorandum Opinion and Order
on 4.22.08
For the foregoing reasons, the court finds that pursuant to Rule 14a8(i)(7), Apache properly excluded the Proposal from the proxy statement mailed to its shareholders. Further, the parties are ORDERED to submit to the court briefs outlining their respective positions on the award of attorneys fees. Apache must submit their brief no later than May 2, 2008. Defendants must submit their response no later than May 9, 2008.
- Filed suit to enjoin proxy solicitation by
Apache and to direct distribution of supplemental proxy materials with regard to
NYCERS proposal
Commentary
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SEC FAQs
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SLB
14A 2002
- Text
- Entire SLB is focused on clarifying SEC position
on shareholder proposals related to equity compensation plans
SLB
14C 2005
- Section C
proposal referencing environmental or public health issues
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2007-2008 No-Action Letters
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Excludable
- Stephen Sacks, Ph.D.
- Proposal re employee health insurance practices
- Amalgamated Bank LongView
Collective Investment Fund
- Create litigation - compliance committee
- Laszlo R. Treiber
- Transfer company's Vioxx liability to the
individuals involved
- Alice Perry and Northstar Asset Management
- Re: policy of publishing chemical and biological
data on its products
- Orlen Van Driessche
- That company cease to offer any stock options
- Excludable per Rule 14a-8(i)(7)
- Company also invoked Rule 14a-8(i)(11)
- Rita Bugzavich
- That company establish an independent committee
to report on potential damage to the company's name and reputation as a result
of its operations in the People's Republic of China
- Excludable per Rule 14a-8(i)(7)
- Company also invoked Rule 14a-8(i)(4)
- Michael L. Saville
- That company establish an independent committee
to report on potential damage to the company's name and reputation as a result
of its operations in the People's Republic of China
- Excludable per Rule 14a-8(i)(7)
evaluation of risk
- Minnesota State Board of Investment (MSBI)
- That company report on the effects of the
company's policy toward the sale of its products to Canada
- Excludable per Rule 14a-8(i)(7)
- Michael R. Levin
- That company adopt and implement a comprehensive
risk strategy
- Excludable per Rule 14a-8(i)(7)
- Company also invoked Rule 14a-8(i)(3)
- Robert H. Calves
- That company adopt policies to ensure the company
and its contractors do not engage in trespassing
- Excludable per Rule 14a-8(i)(7)
- Company also invoked Rule 14a-8(i)(4)
- Central Laborers' Pension, Welfare & Annuity
Funds
- That company amend the governance documents to
adopt and disclose a detailed succession plan
- Excludable per Rule 14a-8(i)(7)
- John Hepburn
- That company evaluate expanding its operations to
New Zealand and Australia
- Excludable per Rule 14a-8(i)(7)
- Company also invoked Rule 14a-8(i)(1)
- Elton W. Shepherd
- That a significant percentage of future awards be
restricted to performance metrics and that future awards not be released or
substantially altered without a shareholder vote
- Excludable per Rule 14a-8(i)(7)
- Company also invoked Rule 14a-8(i)(3)
- Jane Van Driessche
- Re location of company's annual meeting
- Excludable per Rule 14a-8(i)(7)
- Indiana Laborers Pension Fund
- That company amend the governance documents to
adopt and disclose a detailed succession plan
- Excludable per Rule 14a-8(i)(7)
- Company also invoked Rule 14a-8(i)(3) and
Rule 14a-8(i)(6)
- Re: supplemental post retirement pension payments
- Excludable per Rule 14a-8(i)(7)
- Company also invoked Rule 14a-8(i)(4)
- Minnesota State Board of Investment
- That company report on the effects of the
company's policy toward the sale of its products to Canada
- Excludable per Rule 14a-8(i)(7)
- Minnesota State Board of Investment
- That company report on the effects of the
company's policy toward the sale of its products to Canada
- Excludable per Rule 14a-8(i)(7)
- Company seeks prospective relief per Rule
14a-8(i)(4)
- Amalgamated Bank Long View MidCap 400 Index Fund
- Establish a compliance committee to review
mortgage lending
- Excludable per Rule 14a-8(i)(7)
- Minnesota State Board of Investment
- That company report on the effects of the
company's policy toward the sale of its products to Canada
- Excludable per Rule 14a-8(i)(7)
- Company also invoked Rule 14a-8(i)(10)
- John Jennings Crapo
- Requests board report on the process of
submission, introduction, presentation, approval and the carrying out of
shareholder proposals
- Excludable per Rule 14a-8(i)(7)
- New York City Teachers' Retirement System
- Report on avoiding the use of negative and
discriminatory racial, ethnic and gender stereotypes in Company products
- Excludable per Rule 14a-8(i)(7)
- Robert and Lynne Malinoski
- Discontinue the use of stock options for all employees and
associates
- Excludable per Rule 14a-8(i)(7)
- Company also invoked Rule 14a-8(i)(9)
- Promote English lessons when
the company sponsors Spanish-language news programs
- Excludable per Rule 14a-8(i)(7)
- Company also invoked Rule 14a-8(a), Rule 14a-8(i)(3), Rule 14a-8(i)(5)and Rule 14a-8(i)(6)
- That the board appoint an independent committee to evaluate
the strategic direction of the company and study strategic alternatives for the company
- Excludable per Rule 14a-8(i)(7)
- Requests report on climate change
- Excludable per Rule 14a-8(i)(7)
- Requests that
company be fined for failing to promptly
respond to shareholder letters
- Excludable per Rule 14a-8(i)(7)
- Company also invoked Rule 14a-8(i)(3) and
Rule 14a-8(i)(4)
Not
excludable
- Peter Flaherty
- Report on charitable contributions
- International Brotherhood of Teamsters General
Fund
- That company's board make available in its annual
proxy statement information relevant to the company's efforts to safeguard its
operations from a terrorist attack or other security incident
- Not excludable per Rule 14a-8(i)(3) or
14a-8(i)(7)
- International Brotherhood of Teamsters' General
Fund
- That company's board make available in its annual
proxy statement information relevant to the company's efforts to safeguard its
operations from a terrorist attack or other security incident
- Not excludable per Rule 14a-8(i)(7) nor
Rule 14a-8(i)(3)
- 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)
- Establish a board committee to review the
company's policies on human rights in the U.S. and
worldwide
- Not excludable per Rule
14a-8(i)(3), Rule 14a-8(i)(10) nor Rule 14a-8(i)(7)
- Implement policies to
help protect freedom of access to the Internet
- Not excludable per Rule 14a-8(i)(3), Rule
14a-8(i)(6), Rule 14a-8(i)(7) nor Rule 14a-8(i)(10)
Withdrawn
- Sisters of Charity, et al
- Adopt principles for comprehensive health care
reform
- Company also invoked Rule 14a-8(i)(3), Rule
14a-8(i)(6) and Rule 14a-8(i)(10)
- Trinity Health
- Adopt principles for comprehensive health care
reform
- Calvert Asset Management Company, Inc., The
Nathan Cummins Foundation and Boston Common Asset Management LLC
- Report on product
safety
- Company invoked Rule 14a-8(i)(3) and Rule 14a-8(i)(7)
- New York City Employees' Retirement System
- Adopt a
revised code of conduct based on International Labor Organization's (ILO) principles
- Company invoked Rule 14a-8(i)(7) and
Rule 14a-8(i)(10)
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Related Topics
SEC_CODE_REF_0090001192884
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