Shareowner Action Handbook

Proven Shareowner Action Formulas

Proven Shareowner Action Formulas

Shareowner action can be complicated, just like the cartoon to the left from Nearing Zero. We’ll try to point you to proven strategies that work.

Please e-mail me and let me know what other resources should be included on this page.

Those just getting started in corporate governance might benefit from taking a quick spin through a PowerPoint presentation I prepared on how I got interested in the subject, which also outlines five things people can do to make corporate governance more democratic. The talk is entitled Corporate Governance for the 99%. I would be happy to give similar presentations to your group if interested and I’m available. (request file)

Proxy InsightBefore even thinking about filing proxy proposals, make sure you are voting your proxies. Seeing how funds vote before the meeting can often be helpful. Primary sources include:

The best source I have found for locating votes announced before annual meetings is Proxy Insight, a subscription service. If you really want to know who is voting how… or who even who is likely to vote one way or another based on the historical record, Proxy Insight has the best data I have found. 

The most fundamental resource for filing proposals is the Electronic Code of Federal Regulations, specifically § 240.14a-8 Shareholder proposals. One of the best up-to-date (2011) booklets on Filing a Shareowner Proposal is from the Council of Institutional Investors. This provides the basics. See also, AFL-CIO page How to File a Shareholder Resolution. For model proposal language, see ICCR’s list of 2012 Shareholder Resolutions.

It is always easier to borrow language from prior submission than it is to write your proposal from scratch. Two of the best sources for finding proposals that have withstood challenges (they only include measures that made it to the proxy) are:

Supplement the above with SEC: Staff Legal Bulletin No. 14B (CF) on Shareholder Proposals  Staff Legal Bulletin No. 14C (CF)SEC Staff Legal Bulletin No. 14F (CF), and Staff Legal Bulletin No. 14G (CF), which address the issues of what is needed to evidence stock ownership for the purpose of filing a shareowner proposal and use of websites in shareowner proposals. Be sure to confirm whether you broker or bank is a DTC participant by checking DTC’s member participant list. If it isn’t, you will need to take at least one additional step.

A shareholder could satisfy Rule 14a-8(b)(2)(i) by obtaining and submitting two proof of ownership statements verifying that, at the time the proposal was submitted, the required amount of securities were continuously held for at least one year – one from the shareholder’s broker or bank confirming the shareholder’s ownership, and the other from the DTC participant confirming the broker or bank’s ownership.

However, as Staff Legal Bulletin No. 14G (CF) clarifies, two letters are not needed if the broker and clearing bank are within the same overall firm.

The latest Staff Legal Bulletin No. 14H (CF) addresses the provisions of Rule 14a-8(i)(9), which permits a company to exclude a proposal “[i]f the proposal directly conflicts with one of the company’s own proposals to be submitted to shareholders at the same meeting.” For several years SEC staff have misinterpreted that to mean companies can gin up a proposal on the same subject and get the shareholder proposal thrown out. The SLB clarifies the exclusion only applies “if a reasonable shareholder could not logically vote in favor of both proposals.” That should curtail most abuses. Therefore we can expect use of this exclusion to be rare going forward. See also “Directly Conflicts” Clarified by Staff Legal Bulletin.

SEC Rule 14a-8 Proposals of Security Holders, Division of Corporation Finance, Shareholder Proposal No-Action Letters Issued Under Exchange Act Rule 14a-8– contains alpha and chronological listings of letters from companies requesting the SEC to take “no action” if they exclude a shareowner proposal and includes responses from shareowners defending their right to submit proposals. Shareholder Proposals: SEC Staff’s Role explains the process.

This is a valuable source when you have to defend your proposals to the SEC. You can expect a no-action request for many proposals about 40 days from your submission date. While I would never recommend supporting statements that are unnecessarily inflammatory, it is good to see SEC staff rejecting no-action requests based on such allegations.  See DavisPolk Briefing memo, SEC Staff Declines to Exclude Proposals on the Basis of Inflammatory or Incorrect Supporting Statements.

Also be aware of Incoming No-Action Requests Under Exchange Act Rule 14a-8. These are requests that are just entering the system, without responses.

Re the $2000 threshold, the SEC looks back within the 60 calendar days before the date the shareowner submits the proposal to determine if it was valued at least at that amount at some time.

If you are working on a proxy access proposal, I believe you would do well to use my template for 2016 (or please improve upon it), since without the additional specificity included you are likely to achieve only proxy access lite and the target company will have an easier time seeking no-action relief under Rule 14a-8(i)(10). The best legal review I’ve seen is Sidley’s Proxy Access in 2015 – The Year in Review.

If you hope to get a majority vote for your proposal, be aware of how shareowner advisors are likely to recommend. The best quick summary I’ve seen for 2013 comes from Weil, Head’s Up for 2013 Proxy Season: Guidance for How to Address ISS and Glass Lewis Policy Changes.

As You Sow, Proxy Preview, the “Bible for socially progressive foundations, religious groups, pension funds, and tax-exempt organizations.”

FactSet’s corporate governance database, SharkRepellent, provides takeover defense and corporate governance data for more than 5,600 U.S. incorporated public companies.

Investor Voice – You can hire this experienced group to file and pass your resolution.

Northwest Corporate Accountability Project: Somewhat dated but worth scanning through for advice around filing resolutions.

Preparing for “Proxy Access” Shareholder Proposals – Advice for companies – Database of proxies filed at largest US companies. Search by company, date, proponent, % votes obtained, and view the actual proposal in the context of the proxy. Very useful. – Four steps in shareowner action

The Activist Investor Blog, especially Exempt Proxy Solicitations

10 Tips for Dealing with Shareholder Proposals by Rick E. Hansen, Counsel, Chevron Corporation – download pdf on next page – They’ve proven anyone can run a proxy contest. How about you?

Wikipedia Entry

Want to change SEC rules or procedures? Send your comments to the SEC’s Investor Advisory Committee. I you also send your comments to me, James McRitchie, I can often get the word out and help you lobby for change.


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