The Ford Motor Company ($F) challenged my resolution on Transparent Political Spending and lost. I created a new posting category, “SEC no-action letters.” Posts under this category will include what I believe are precedent setting decisions. By including them on CorpGov.net I will be creating a searchable database going forward of significant decisions for ready future reference. Hopefully, it will reduce the need to recreate the wheel and will save on time defending similar proposals. Read the full no-action file at the SEC.
Transparent Political Spending: Proposal at Ford
The proposal was straightforward:
Resolved: Shareholders of Ford Motor Company (“Ford” or “Company”) hereby request Ford provide a report, updated semiannually, disclosing the Company’s:
- Policies and procedures for making, with corporate funds or assets, contributions and expenditures (direct or indirect) to (a) participate or intervene in any political campaign on behalf of (or in opposition to) any candidate for public office, or (b) influence the general public, or any segment thereof, with respect to an election or referendum.
- Monetary and non-monetary contributions and expenditures (direct and indirect) used in the manner described in section 1 above, including: (a) The identity of the recipient as well as the amount paid to each; and (b) The title(s) of the person(s) in the Company responsible for decision-making.
The report shall be presented to the board of directors or relevant board committee and posted on the Company’s website within 12 months from the date of the annual meeting. This resolution does not encompass lobbying.
Transparent Political Spending: Ford’s No-Action Request
Ford requested a no-action based on Rule 14a-8(i)(11), substantial duplication. They argued my proposal duplicated one from the Unitarian Universalist Association (UUA) that seeks transparency on lobbying expenditures. At the heart of Ford’s argument is an effort on page 6 to redefine the word referendum to include legislation.
Transparent Political Spending: Rebutting Ford Request
The UUA Proposal makes no mention of political contributions or anything that could be confused with political contributions.
Since Ford cannot find such possible confusion in the UUA Proposal, the Company attempts to create confusion by returning to a discussion of the McRitchie Proposal, insisting the “self-serving lobbying carveout should not be given any deference” because it seeks disclosure of information with respect to “an election or referendum.” (Ford’s emphasis) Ford seeks to sow confusion by pointing out that a referendum can be “proposed by a legislative body or popular initiative.”
Ford attempts to confuse the process of promulgating legislation, which can be influenced by lobbying, with referenda submitted to popular vote during elections.
The McRitchie Proposal seeks no information with respect to spending during the legislative process itself, even if that legislation might result in a referendum. Only once such legislation is passed would it then be covered by the Transparent Political Spending proposal with disclosure of policies and procedures, contributions and expenditures with respect to an election or referendum.
Note on the History of Rule 14a-8(I)(11)
My rebuttal also includes an excerpt from The Exclusion of Duplicative Proposals Under Rule 14a-8(i)(11) by Hillary Sullivan. The “substantially duplicates” exemption has already evolved through Staff interpretation well beyond its original intent without benefit of going through public notice and other considerations of the rulemaking process. Staff should take a lesson from the recent reexamination of Rule 14a-8(i)(9), which resulted in issuing Staff Legal Bulletin No. 14H.
If we applied that standard to Rule 14a-8(i)(11) and these proposals, shareholders could logically vote for both proposals. While issuing a Staff Legal Bulletin to guide a similar return to original intent for Rule 14a-8(i)(11) is unnecessary in the instance of Ford’s no-action request, since the Company fails to make its case, it is worth noting the parallels. The Rule was originally intended to exclude duplicate proposals, not materially different proposals, which may address overlapping concerns.
Transparent Political Spending: SEC Staff Decision on Ford Request
The February 6, 2018, decision was typically terse.
The Proposal requests that the company provide a report on political contributions and expenditures that contains information specified in the Proposal.
We are unable to concur in your view that the Company may exclude the Proposal under rule 14a-8(i)(11). In our view, the Proposal does not substantially duplicate the proposal submitted by the Unitarian Universalist Association. Accordingly, we do not believe that the Company may omit the Proposal from its proxy materials in reliance on rule 14a-8(i)(11).