Visa: Simple Majority – Win or Lose?

VisaManhattan InstituteThe Manhattan Institute‘s Proxy Monitor Project would call it another failure by gadfly shareholders, since Visa Inc. (V) filed a no-action request with the SEC and is very likely to receive the go-ahead to exclude our Simple Majority proposal from their proxy. If that happens, there is no way it will receive a majority vote from shareowners. Therefore, the Proxy Monitor Project will count the proposal as a loss for shareowners and a waste of money for the corporation.

The loss provides more fodder for the US Chamber of Commerce, SEC Commissioner Daniel Gallagher and others who point to the low percentage of shareholder proposals that win approval as rationale for dramatically reducing the rights of shareowners to be able to file any such proposals. However, a second look reveals my filing for a simple majority vote standard to be another win for both shareowners and the company.

Visa’s no-action letter, submitted on their behalf by law firm Gibson Dunn, argues no-action relief should be granted under Rule 14a-8(i)(10) since the company “has substantially implemented the proposal.” How? The Board plans to consider adopting a simple majority standard at their October meeting. If approved, the Board will then submit the amendments to a stockholder vote at the 2015 Annual Meeting.

Of course, I would rather the SEC wait until the Board has acted to render their decision. However, granting no-action relief based upon a promise by management to put the proposal to the Board has become routine. If the Board subsequently rejected the proposal, I think the request for no-action might be seen as acting in bad faith. The consequences for a Board facing reelection in the face of such a betrayal might be severe.

For me, it looks like a win. My wife and I don’t have to rebut arguments that Visa could have made about the supposed ‘benefits’ of their current supermajority requirements and entrenchment. Additionally, I don’t have to travel to present the proposal at Visa’s annual meeting; Visa will present it for me, as management’s proposal. 

It is well established, shareowner resolutions to eliminate supermajority provisions have long obtained substantial support. Even going back to 2003, such resolutions attracted on average 60% of the shares voted, the second-highest level of support among all types of shareholder resolutions (Lucian Bebchuk, Alma Cohen, and Allen Ferrell, Footnote 3, Georgeson Shareholder, 2003). The same study by Bebchuk, et al., found that limits to amending bylaws and charters, as well as other supermajority requirements, were correlated with lower shareowner returns.

Visa’s capitulation to our request may be counted as another losing shareholder proposal by the Proxy Monitoring Project, but for shareowners and company alike it is really a win-win.

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