Here’s something interesting from Meredith’s Proxy Season blog about SEC determinations on requests to exclude shareholder proposals from company proxies.
This HLS blog reports on the results of Mayer Brown’s review of SEC Staff responses to almost 280 no-action requests from February 13 (immediately post-SLB 14M) to May 2. Interestingly, it notes that the widespread prediction that SLB 14M would make it more challenging for proponents to overcome no-action requests under Rule 14a-8(i)(5) and/or Rule 14a-8(i)(7) based on broad social policy concerns “only somewhat seems to have come to fruition during the 2025 proxy season to date.”
With respect to the “economic relevance” exclusion under Rule 14a-8(i)(5), the blog says Staff was generally “unable to concur” when the proponent cited reasons the “subject of the proposal likely was implicated by the companies’ specific actions, rather than any hypothetical or general societal risk.” For example:
One proposal requested that the company’s board of directors provide a “report outlining the effectiveness of the Company’s policies, practices, and performance indicators in respecting internationally recognized human rights standards for Indigenous Peoples’ rights in its existing and proposed general corporate and project financing”. The proponent provided the company’s “history of financing projects that violate indigenous people’s rights” as a supporting statement.
With respect to the “ordinary business” exclusion under Rule 14a-8(i)(7), the blog identifies a few common traits among proposals where the Staff was “unable to concur.”
First, almost all address a social policy issue, such as climate-related risk or ESG or anti-ESG policy, and each proposal can be directly tied to the company’s business and operations in a manner that is specific to that company, rather than a general, broad-based risk that could be applicable to many companies.
None of the proposals includes intricate detail; for example, none require the company to act within a specific time frame or give specific instructions for how the company should act in response to the proposal.
Lastly, the Staff did not view any of the proposals as being “too complex” for shareholders to consider or, in other words, none of the proposals were characterized as being too prescriptive to the company.
The blog also notes that “it is not always possible to determine the specific factors that form the bases of the Staff’s decisions.” That’s a good reminder to me to remind you to remind ourselves of the informal, non-binding and fact-specific nature of Staff responses to no-action requests when we’re analyzing trends in Staff concurrence rates.
As a quick reminder to sustainability professionals unfamiliar with the proxy process, companies can petition the SEC to take no action on shareholder proposals (“no-action requests”), but must provide justification. There are rules and guidance (such as Staff Legal Bulletins – “SLBs”) setting forth the criteria for SEC Staff determinations on these requests. Staff may concur with a no-action request – or not. As Meredith points out:
- Staff responses are informal and non-binding views about the particular bases for exclusion that companies identify, for the particular proposals at issue. They are very fact-specific.
- The Staff doesn’t “force” a company to include/exclude a proposal or “tell a company that it must allow shareholders to vote.”
- Some responses are based on procedural grounds for exclusion – don’t misinterpret those as a response on substantive grounds.
How has the 2025 proxy season gone so far this year? See the next blog.
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