Of Alter Egos and Solicitations

Broc Romanek, of theCorporateCounsel.net has drawn the attention of his subscribers to an online solicitation by Physicians Committee for Responsible Medicine “to essentially “borrow” shares in an effort meet the eligibility requirements of the shareholder proposal rule and be able to submit shareholder proposals at 11 companies (and thus advance their own social agenda)? Pretty blatant violation of Rule 14a-8(b) in my opinion.”

He thinks that because of their solicitation, “PCRM will have a hard time arguing that it intends to act as somebody’s agent or representative, which is the argument that John Chevedden has successfully made on a number of occasions. In this case, I think PCRM would be ‘dead in the water’ if a company raised an alter ego argument in an exclusion request to Corp Fin.” He’s already heard that a request for exclusion by Starbuck’s was granted by Corp Fin in December. However, as he notes, that was granted on the ordinary business basis, 14a-8(i)(7), and  “the company didn’t make an eligibility argument.”

Romanek is much more expert in these matters than I am but the “alter ego” argument put forth by Gibson Dunn & Crutcher and Wachtell Lipton Rosen & Katz was based on the noting that shareowners serve as Chevedden’s puppets, his “alter egos,” allowing him to circumvent the one proposal per shareholder limit for each meeting under SEC Rule 14a-8 (c) and be heard at meetings where he is not eligible. There is nothing in the solicitation by Physicians Committee for Responsible Medicine indicating they intend to submit more than one proposal at each of the firms with which they express concern.

Frankly, I don’t see anything wrong with trying to find shareowners who are sympathetic to your cause and offering to work with them to submit resolutions. Is that immoral? Illegal? Why?

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