parent nodes: control of corporation | corporation law | inspection right | proxy contest
shareholder proposal
Any shareholder may bring a proposal to be included in proxy voting materials if they have held $2000 in stock in a corporation for at least 1 year. SEC Rule 14(a)(8)(b).
(I) (Shareholder proposals may be rejected if).
1. Improper under state law: If the proposal is not a proper subject for action by shareholders under the laws of the jurisdiction of the company's organization;
2. Violation of law: If the proposal would, if implemented, cause the company to violate any state, federal, or foreign law to which it is subject;
3. Violation of proxy rules: If 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;
4. Personal grievance; special interest: If the proposal relates to the redress of a personal claim or grievance against the company or any other person, or if it is designed to result in a benefit to you, or to further a personal interest, which is not shared by the other shareholders at large;
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;
6. Absence of power/authority: If the company would lack the power or authority to implement the proposal;
7. Management functions: If the proposal deals with a matter relating to the company's ordinary business operations;
8. Relates to election: If the proposal relates to an election for membership on the company's board of directors or analogous governing body;
9. Conflicts with company's proposal: If the proposal directly conflicts with one of the company's own proposals to be submitted to shareholders at the same meeting.
10. Substantially implemented: If the company has already substantially implemented the proposal;
11. Duplication: If the proposal substantially duplicates another proposal previously submitted to the company by another proponent that will be included in the company's proxy materials for the same meeting;
12. Resubmissions: If the proposal deals with substantially the same subject matter as another proposal or proposals that has or have been previously included in the company's proxy materials within the preceding 5 calendar years, a company may exclude it from its proxy materials for any meeting held within 3 calendar years of the last time it was included if the proposal received:
1. Less than 3% of the vote if proposed once within the preceding 5 calendar years;
2. Less than 6% of the vote on its last submission to shareholders if proposed twice previously within the preceding 5 calendar years; or
3. Less than 10% of the vote on its last submission to shareholders if proposed three times or more previously within the preceding 5 calendar years; and
13. Specific amount of dividends: If the proposal relates to specific amounts of cash or stock dividends.
SEC Rule 14(a)(8)(I)
Shareholder proposals are not binding; they are only a recommendation.
Corporations can inoculate themselves somewhat by getting a "no-action" letter from the SEC promising (but not binding the SEC legally) not to bring suit against the corporation for refusing a shareholder proposal. Note that the SEC policy is very political and fluctuates over time.
Cases allowing shareholder proposals
[Lovenheim v Iroquis Brands] (forcing company to allow shareholder proposal vote to research company's production of foie gras under exception for "otherwise significant" issues, even where foie gras made up tiny percentage of corporation's business)
[NYCERS v Dole Foods] (forcing company to allow shareholder proposal on national health care plans, where Dole had objected that the subject was beyond its power and financially insignificant, on the grounds that the health care costs would have a significant impact on its business, that the proposal was not beyond Dole's powers since it would only require studying health care)
[AFSCME v AIG] (forcing company to allow shareholder proposal to amend bylaws requiring directors to publish shareholder nominees to board of directors, rejecting challenge that it "relates to an election")
Cases not allowing shareholder proposals
[Austin v Consolidated Edison] (rejecting shareholder proposal to change rules on when workers can retire as addressing day-to-day operations and personal grievances)
corporation law, control of corporations