Tag Archives | Hain Celestial

Hain Celestial Group: How I Voted – Proxy Score 64

Hain CelestialHain Celestial Group Inc (HAIN) manufactures, markets, distributes, and sells organic and natural products in the United States, the United Kingdom, Canada, and Europe.  Hain Celestial is one of the stocks in my portfolio. Their annual meeting is on November 19, 2015. ProxyDemocracy.org had collected the votes of two funds when I checked. I also checked CalSTRS, since their votes don’t seem to be posted at ProxyDemocracy.org and I voted with the Board’s
recommendations 64% of the time. View Proxy StatementContinue Reading →

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United Natural Foods (UNFI) & Hain Celestial (HAIN): Win or Loss?

United Natural Foods logoHain CelestialWith John Chevedden‘s help, I recently submitted shareowner proposals to United Natural Foods Inc. (UNFI) and The Hain Celestial Group, Inc. (HAIN). Both have asked the SEC for no-action letters [UNFI (UNFI no-action 8-15-2014 pdf) and HAIN] because they plan to introduce their own proposals on the same subjects. The SEC is likely to grant both requests. Shouldn’t such actions be counted as ‘gadfly’ wins by pundits like the Deal Professor? More importantly, should the SEC grant such no-action requests? Continue Reading →

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Hain Celestial to Adopt Majority Vote Standard

HAINLast month, with the help of fellow ‘economy class investor’ John Chevedden, I submitted a proposal to Hain Celestial (HAIN) to adopt a full majority director election standard. Majority voting has become a widely prevalent practice in the S&P 500 index, with only 14% of companies failing to adopt this standard. Hain is in the S&P 600 mid-cap index where only 47% have adopted a majority vote standard. Most maintain a plurality standard. So, we were attempting to move this good governance standard downstream to mid-caps. Continue Reading →

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SEC Abandons Celestial Reasoning, Divides Petition-Baby in Half

SEC Staff Legal Bulletin No. 14F (CF) finally addresses the issues of what is needed to evidence stock ownership for the purpose of filing a shareowner petition. It is obvious from first glance that shareowners whose broker or bank isn’t a DTC participant just got screwed.

We will take the view going forward that, for Rule 14a-8(b)(2)(i) purposes, only DTC participants should be viewed as “record” holders of securities that are deposited at DTC. As a result, we will no longer follow Hain Celestial.

On the other hand, we are still left with half the baby.

Companies have occasionally expressed the view that, because Continue Reading →

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New Standards For Documenting Eligibility to Submit Shareowner Proposals

Today, the United States Proxy Exchange issued standards for documenting eligibility to submit shareowner proposals.

Submitting shareowner proposals is a primary means by which shareowners influence the corporations they own. The process is governed by SEC Rule 14a-8. One provision of that rule—Rule 14a-8(b)(2)—specifies how sharewners prove they own shares in a corporation for the purpose of submitting a proposal.

In recent years, executives at a number of corporations have attempted to exploit ambiguity in that provision to reject proponents’ documentation of eligibility. These efforts have included multiple no-action requests of the SEC and the frivolous Apache vs. Chevedden lawsuit. Both the SEC staff and the Federal District Court in Houston have mostly rejected these efforts.

The controversy has raised concerns at securities intermediaries, who have approached the United States Proxy Exchange (USPX) for guidance on what constitutes acceptable documentation of a client’s eligibility to file a proposal under Rule 14a-8. In the Summer of 2010, the USPX started work preparing recommended standards to meet this need. They suspended that work upon learning the SEC planned to issue a staff legal bulletin on the same topic. Instead, they sent the Commission a detailed letter summarizing their conclusions.

With many demands on their staff, the SEC was unable to complete the staff legal bulletin by November 2010. That is when many corporations had a deadline for submitting proposals for 2011. Accordingly, the USPX is releasing the standards as an interim solution until the Commission is able to release a staff legal bulletin.

The centerpiece of the standards is a template letter for use by securities intermediaries to use for documenting their clients’ eligibility to file a proposal under Rule 14a-8. This was developed based on a careful review of relevant no-action decisions, staff legal bulletins, and the Apache vs. Chevedden lawsuit. It also reflects informal discussions with SEC staff as well as USPX members’ direct experience filing many shareowner proposals.

The USPX is releasing the standards in a full length version, which includes notes, and in a single-page summary version, which will be convenient for shareowners to e-mail or fax to their bank or broker. Both versions can be accessed via the USPX website.

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SEC Snookered Into No-Action Again

Looking through a few of the relatively recent no-action letters, I see the SEC continues to buy into substitute proposals at higher thresholds to call a special meeting than those proposed by shareowers. In the latest insult, a no-action letter was issued to Hain Celestial to deflect a proposal from Kenneth Steiner calling for a 10% threshold. Hain substituted their’s calling for a 25% threshold.

Hain argued the proposals were in direct conflict because they include different thresholds for the percentage of shares required to call special shareholder meetings and that there is potential for conflicting outcomes if the shareholders consider and adopt both proposals. It amazes me that the SEC continues to get snookered by this logic.

Maybe we need a new rule. If two substantively similar proposals are passed by shareowners, the one with the highest vote count wins.

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Apache v. Chevedden: a Non-Starter

It would appear that Apache v. Chevedden is now fading into oblivion. Two companies have sought no-action letters based Apache-inspired arguments. Both have failed. To briefly review:

Susman Godfrey L.L.P. Wins First-of-Its-Kind Judgment for Apache Against Shareholder Activist, MSN Money, 3/12/10; Susman Godfrey L.L.P. Wins First-of-Its-Kind Judgment for Apache Against Shareholder Activist, Forbes, 3/12/10; Susman Godfrey L.L.P. Wins First-of-Its-Kind Judgment for Apache Against Shareholder Activist, BizJournals, 3/12/10. OK, a law firm got a lot of publicity for “winning” a lawsuit on behalf of a giant firm against an individual who represents himself in court.

Some speculated the case might lead to a change of course in future no-action letters from the SEC. For example, Post “Apache v. Chevedden”: What Will Companies (and the SEC) Do Now (TheCorporateCounsel.net Blog, 3/11/10).

It’s unclear what application the case has beyond its specific decision, since the Judge noted her opinion is narrow – and yet it could be argued that some of her reasoning throws into question the SEC’s Hains position and other forms of proof of ownership. So the waters are a little murky here too.

I disagreed, since the judge clearly stated:

Hain Celestial was not a “rogue” position. The Hain Celestial no-action letter was neither the first or last letter in which the S.E.C. staff declined to agree that a letter from the registered owner was required under Rule 14a-8(b)(2).

Another frequent commentator, viewed the ramifications differently (Half a Loaf? Narrow Court Opinion Allows Exclusion of Activist’s Proxy Proposal, Jim Hamilton’s World of Securities Regulation, 3/11/10):

Following such a narrowly-drawn opinion in the Texas case, and the lack of any fee award, it is not likely that large numbers of issuers will follow Apache’s lead. Litigation is costly and time-consuming, and many issuers may be hesitant to square off against their own investors on questions that are procedural and not related to the substance of the proposal.

I’m relatively certain that if the judge had all the facts in the Apache case, she never would have ruled the way she did. Here is what the judge said:

RTS is not a participant in the OTG. It is not registered as a broker with the SEC. or the self-regulating industry, organizations FINRA and SIPC. Apache argues that RTS is not a broker but an investment adviser, citing its registration as such under Maine law, representations on RAM’s website, and federal regulations barring an investment adviser from serving as a broker or custodian except in limited circumstances … The record suggests that Atlantic Financial Services of Maine. Inc., a subsidiary of RTS that is also not a DIG participant, may be the relevant broker rather than RTS. Atlantic Financial Services did not submit a letter confirming Ghevedden’s stock ownership. RTS did not even mention Atlantic Financial Services in any of its letters to Apache.

After the judge’s ruling, Chevedden was able to follow-up with RTS. RTS confirmed they are a Maine chartered non-depository trst company and that they do, in fact, directly hold his shares in an account (under the name Ram Trust Services) with Northern Trust. Their letter made no mention of AFS because AFS plays no role in the custody of his shares. For purposes of Rule 14a-8, RTS is the record holder of his securties. The judge ruled “narrowly” against Chevedden because she thought AFS might be the real record holder.

Shareowners can rest easier knowing the SEC, which is more familiar with not only its own rules but with the structure of the financial industry, isn’t making the same error.  First the SEC rejected arguments by Gibson Dunn on behalf of Union Pacific on March 26, 2010. More recently, in a letter dated April 20, 2010, the SEC rejected a similar no-action request by Mayer Brown on behalf of Devon Energy. Mayer Brown offered the following:

Specifically, in Apache Corp, the court found that a letter from RTS, intended to establish the Proponent’s satisfaction of Rule 14a-8 ownership requirements with respect to another public company, was insufficient for that purpose because RTS purported to be the Proponent’s “introducing broker” but is not, in fact, a registered broker. RTS was also not a registered holder of the securities at issue, and was not a DTC participant. For these reasons, the court found that a letter fromRTS was unreliable and could not satisfy the eligibility requirement of the Proponent under Rule 14a-8. See Apache Corp. v. Chevedden, a copy ofwhich is attached as Exhibit C.

The SEC responded:

We are unable to concur in your view that Devon Energy may exclude the proposal under rules 14a-8(b) and 14a-8(f). Accordingly, we do not believe that Devon Energy may omit the proposal from its proxy materials in reliance on rules 14a-8(b) and 14a-8( f).

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