2^nd Circuit rules that proxy access bylaw proposals
can't be excluded under Rule 14a-8(i)(8)

• Overturns a 2005 SDNY decision in favor of AIG
• Court declined to defer to SEC's interpretation of the rule
• Rule 14a-8(i)(8) is the election exclusion

• Rule 14a-8(i) allows companies to exclude specified types of shareholder proposals from the company's own proxy statement
• See Rule 14a-8(i)
• In particular, per Rule 14a-8(i)(8), a company can exclude a proposal that "relates to an election" of directors
• See Rule 14a-8(i)(8)

• AFSCME had submitted a shareholder proposal to AIG

• Proposed to amend AIG's bylaws so that
  shareholder-nominated candidates would be
  included on the corporate ballot

• SEC supported AIG's decision to exclude this proposal

• Initially, by issuing a no-action letter at AIG's request
• Later, by filing amicus briefs in support of its position
• On grounds that it "related to an election"of directors

• 2nd Circuit found that SEC had been inconsistent in interpreting Rule 14a-8(i)(8)

• So that typical deference to an agency's interpretation
  of its own rule didn't apply

• 2nd Circuit applies SEC's 1976 interpretation

• Rather than SEC's current interpretation
• To find that Rule 14a-8(i)(8) applies to
  "shareholder proposals that relate to a particular election and not to proposals that, like AFSCMEs, would establish the procedural  rules governing elections generally."

Opinion   2006 WL 2557941 (2d Cir. 9.05.06)

• Introduction
• Background
• Discussion
• Conclusion

Other filings

• Amicus briefs

• Council of Institutional Investors  Mar 2005

Opinion  3.22.05   361 F Supp 2d 344

Filings

• Complaint 2.25.05
• Motion for preliminary injunction 2.25.05
• Plaintiff's brief 2.25.05
• Defendant's brief 3.14.05
• Plaintiff's reply brief 3.18.05

Rules

• Rule 14a-8(i)  Question 9

• "on what other bases may a company rely to exclude my proposal?"  ...

• Rule 14a-(8)(i)(8)

• "Relates to election: If the proposal relates to an election for membership on the company's board of directors or analogous governing body;"
  Emphasis added
• Sometimes called the election exclusion

Following are SEC releases cited in 2nd Circuit opinion

• SEC Rel 34-12598 7.07.76

• Proposed changes to Rule 14a-8

• SEC Rel 34-12599 7.07.76

• SEC statement about Rule 14a-8

• SEC Rel 34-12999 11.22.76

• Adopted changes to Rule 14a-8

News items

• AFSCME press release

Law firm commentary

• Wachtell Lipton 9.28.06

In 2006, SEC said it would consider proposing amendments to Rule 14a-8  to address this

• Initially said it would act at its 10.18.06 meeting

• SEC press release 9.07.06

• Then said it would act at 12.13.06 meeting

• SEC press release 10.11.06

• But dropped matter from final agenda for 12.13.06 meeting

• Sunshine Act notice 12.06.06

Prior SEC statements

• SEC Commissioner Atkins  1.22.07
  Look under Shareholder Access
• Corp. Fin. Director, John White  2.26.07 
  Goal remains to act in time for 2008 proxy season
• SEC roundtable discussions on proxy process  May 2007
  SEC will propose rule in early summer 2007