In separate rulings, SEC staff rejected requests by Prudential Financial, Union Pacific, and Devon Energy to omit governance proposals filed by John Chevedden. They argued Chevedden’s proof-of-ownership letters did not comply with SEC Rule 14a-8(b). However, each of his broker’s letters stated that Chevedden holds shares through them and they also identified a member of the DTC which in turn holds those shares on their behalf.
Apache and KBR have not filed no-action requests this year, but have informed the SEC they plan to exclude Chevedden proposals that also are supported by RTS letters. The SEC staff has yet to publicly weigh in the proposals at Apache and KBR. Apache sued Chevedden last year and won a federal court ruling that a similar RTS letter was not sufficient under Rule 14a-8(b), but Chevedden has argued that this ruling was based on erroneous information provided by Apache. KBR has filed a similar lawsuit this year in the same federal court in Texas where Apache won its decision…
Meanwhile, the SEC also continues to turn aside eligibility challenges to proposals submitted by other members of Chevedden’s investor network. The commission staff recently rejected challenges by Allstate, McGraw Hill, and JPMorgan Chase to written consent proposals filed by Kenneth Steiner, as well as Amgen’s attempt to exclude a written consent resolution from William Steiner.
Companies have had success raising eligibility challenges this season against other proponents. So far, the SEC staff has allowed companies to omit 14 governance proposals based on proof-of-ownership objections, according to ISS data. In most cases, the proponents failed to provide any further evidence or correspondence after receiving a deficiency notice from a company.
via Retail Proponents Survive Eligibility Challenges – Governance, RiskMetrics Group, 3/2/2011.
KBR notified the SEC of their intent to bypass the no action request process. I think it is safe to say this effort by several corporations to intimidate shareowners is failing. Chevedden used USPX developed standards to ensure proof of ownership. Although these standards are a bit over the top, going beyond what is required by the SEC, I recommend shareowners use them to avoid attempts by companies to exclude their proposals.
I fully expect the Apache and KBR lawsuits will fall next. Hopefully, we will soon see the court dismiss the suits for lack of standing. There should be serious financial penalties for dragging shareowners into court for simply exercising their rights. Every shareowner should express their dismay at such unethical behavior.