ABT Fair Treatment of Shareholder Nominees cover of 2023 proxy

ABT: Fair Treatment of Shareholder Nominees

ABT Fair Treatment of Shareholder Nominees is an update of my (James McRitchie) effort in the recent proxy season to address the growth of abusive advance notice bylaws aimed at disadvantaging shareholder nominees under universal proxy rules. (see Procter & Gamble Fair Elections and Procter & Gamble 2023: Our Proxy Votes, which won 43% of the vote) As I noted previously, I had a small role in winning proxy access. Unfortunately, companies limited proxy access nominating groups of shareholders to 20 members, which made the process impractical as a fair elections tool. The recent adoption of universal proxy rules by the SEC is being used as cover by many companies adopting advance notice bylaws giving board nominees additional advantages over shareholder nominees. This proposal was filed at Abbott Laboratories (ABT).

ABT Fair Treatment of Shareholder Nominees: Resolved

Shareholders request the Board of Directors adopt and disclose a policy stating how it will exercise its discretion to treat shareholders’ nominees for board membership equitably and avoid encumbering such nominations with unnecessary administrative or evidentiary requirements.

ABT Fair Treatment of Shareholder Nominees: Supporting Statement

In the view of the proponent, the Board should consider exercising its discretion under the proposed policy toward ensuring that paperwork requirements governing the nomination and election of directors should generally treat shareholder and Board nominees equitably; requirements regarding endorsements and solicitations should not unnecessarily encumber the nomination process.

Consideration should also be given under the policy to repealing any advance notice bylaw provisions imposing additional requirements inconsistent with this proposal, unless legally required, such as those requiring:

  • Nominating shareholders be shareholders of record, rather than beneficial owners;
  • Nominees submit questionnaires regarding background and qualifications (other than as required in the Company’s certificate of incorporation or bylaws);
  • Nominees submit to interviews with the Board or any committee thereof;
  • Shareholders or nominees provide information that is already required to be publicly disclosed under applicable law or regulation; and
  • Excessive or inappropriate levels of disclosure regarding nominees’ eligibility to serve on the Board, the nominees’ background, or experience.

The legitimacy of Board power to oversee the executives of Abbott Laboratories (Company) rests on the power of shareholders to elect directors:[1] [T]he unadorned right to cast a ballot in a contest for [corporate] office . . . is meaningless without the right to participate in selecting the contestants… To allow for voting while maintaining a closed candidate selection process thus renders the former an empty exercise.”[2]

Burdening shareholder nominees can entrench incumbent directors and management. Laws and regulations overseen and enforced by the U.S. Securities and Exchange Commission, a neutral third party, ensure shareholders have pertinent information on nominating shareholders and nominees before executing proxies,[3]

Advance notice bylaws can create hurdles for shareholders exercising their rights and can be used to conduct “fishing expeditions” to which board nominees are not subject.

These practices delegitimize corporate activity because directors work on behalf of shareholders, who should be able to replace their own fiduciaries. Company interference in this process is especially dangerous because financial theory recommends that most shareholders diversify their portfolios.

Such diversified investors have an interest in ensuring our Company does not profit from practices that threaten social and environmental systems upon which diversified portfolios depend.[4] Company directors influenced by executives, in contrast, may prioritize Company profitability over systems that are of critical importance to shareholders.[5]

Accordingly, giving Company directors a gatekeeper role through a burdensome unequal nomination process threatens the interests of shareholders to nominate candidates free of management influence.

Fair Treatment of Shareholder Nominees – Vote FOR Proposal [4* number assigned by ABT]

[1] https://ssrn.com/abstract=4565395

[2] https://casetext.com/case/durkin-v-national-bank-of-olyphant

[3] https://www.ecfr.gov/current/title-17/chapter-II/part-240/subpart-A/subject-group-ECFR8c9733e13b955d6/section-240.14a-101

[4] https://theshareholdercommons.com/wp-content/uploads/2022/09/Climate-Change-Case-Study-FINAL.pdf

[5] https://ssrn.com/abstract=4056602

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One Response to ABT: Fair Treatment of Shareholder Nominees

  1. Mike Schaefer 12/21/2023 at 10:47 am #

    This is Mike Schaefer, 85, representing 10 million Californians as Member, Board of Equalization.You should be aware of Lewis D. Gilbert and his book Dividends & Democracy, about 1950s.

    I was his secretary in NYC summer 1959, and for decades for $100 & Airfare would travel the nation and present his
    14b Shareholder Proposals at shareholder meetings, and had a half dozen of my own. At Starbucks, I spoke to Chair about the surprise of having to PAY $12 FOR PARKING, at Seattle Center I represented I had attended some 100 shareholder meetings over decades and always found free parking available. That Chair was “expert at negotiating the price of coffee in many world venues, how about negotiating the price of shareholder parking for next meeting, after all Mr. Chair, all of us here are, like yourself, HERE ON COMPANY BUSINESS.” I got applause and the attention of Howard Schroeder.

    I also took Herb Kelleher of SWA to task when after years of a 9am mini buffet of coffee, and nibble food, there was ZILCH and a sign noting that shareholders, like management, had to tighten their belt as the year was difficult. I advised Herb that due process, via the proxy statement, requires that while such is his perrogative, shareholders are entitled to NOTICE, that for years I had skipped breakfast out knowing nibble food awaited me, and now, SURPRISE. That is not appropriate. “If it ever arises again, please know that THIS INVESTOR will host the coffee and treats for the meeting; just call. (got applause and his attention). Pleased to see a man of your calibre protecting American investors.

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