Tag Archives | no-action

Transparent Political Spending: Ford Lost No-Action

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. Continue Reading →

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AES “Games” SEC: CII Seeks Correction

CII sent an important letter to the SEC on a recent no-action issued to the AES Corporation (AES) (not yet posted). A similar no-action had been granted in 2016 to Illumina (ILMN) on a proposal I (James McRitchie) had submitted. ISS referenced both. From the facts regarding AES, it appears John Chevedden submitted a proposal to lower the required threshold for shareholder to call a special meeting. The current standard is 25%. Chevedden’s proposal requested 10%. The SEC’s no-action letter gave the following rationale: Continue Reading →

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Gadfly Proposals Reduce Value?

Deal Professor Envisions Corporate Gadfly

Starting with Corporations

Gadfly proposal on your corporate proxy? One implicit conclusion from a recent academic study is that you should short the company as soon as the SEC disapproves the company’s no-action request, since a proposal from a gadfly is likely to reduce the company’s value. Even though their intent is primarily to show why managers generally oppose proposals, that is the takeaway investment strategy one might conclude from a paper by John G. Matsusaka, Oguzhan Ozbas and Irene Yi entitled Why Do Managers Fight Shareholder Proposals? Evidence from No-Action Letter Decisions. (Why Do Managers Fight Shareholder Proposals, pdf)

Investors Skeptical of Gadfly Proposals

Researchers found a statistical correlation between Securities and Exchange Committee (SEC) staff decisions to block a no-action request and negative abnormal returns over the period of 2007-2016, “suggesting that investors agree with managers that these proposals are value-destroying.” “[O]ur main finding is that the market responded positively to the granting of a no-action letter.” “Investors are not particularly skeptical of proposals by unions and public pensions, but appear to view proposals by individual ‘gadfly’ shareholders as value-destroying.” Continue Reading →

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Business Roundtable to SEC: Muzzle Shareholders

proxymonitorsmeasurecsmypropsAs I indicated yesterday, I have been contacted by several reporters for comments on the latest screed from the Business Roundtable seeking to muzzle the rights of shareholders. Although I have much more productive ways to occupy my time, it does make sense for me to provide at least some response, since the Business Roundtable names me among those “pursuing special interests… frequently at a significant cost to the company.”

Their statistics do not come from an objective third party, such as Proxy Insight, but from the conservative Manhattan Institute‘s Proxy Monitor (funded in part by the Koch Family Foundations), covering only 250 out of thousands of American companies. The Business Roundtable titled their report Responsible Shareholder Engagement And Long-Term Value Creation: Modernizing the Shareholder Proposal Process. Don’t be fooled by the numbers they use, claiming few proposals pass. The Business Roundtable doesn’t count proposals that don’t make it to the proxy because proponents and companies have reached agreement. They don’t count proposals filed at the thousands of small companies, which tend to have poorer corporate governance practices. ‘Modernization’ for the Business Roundtable means moving the SEC further and further from its primary mandate of ‘investor protection’ by creating a democracy-free zone for entrenched managers.  Continue Reading →

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Foiled Without Binding Proxy Access Proposals

There will be no rush to binding proxy access proposals, thanks to a July 21 denial of a no-action request filed by H&R Block. Corporations (HRB) continue with Wile E. Coyote type plots to derail genuine proxy access. See this incoming no-action request from Microsoft (MFST). However, in the case of H&R Block we foiled the latest plot to keep corporate governance a democratic-free zone without resorting to binding proxy access proposals. Continue Reading →

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RIA Hands Untied by SEC No-Action Denial

RIA Hands Untied

RIA Hands Untied

RIA hands untied by Newground Social Investments team and the SEC’s refusal to grant a no-action letter to Baker Hughes (BHI, $BHI) on February 22, 2016. Congratulations to Bruce Herbert and staff at Newground, as well as to their advisors.

We have discussed the importance of not counting abstentions before at Simple Majority Vote Counting Initiative for Proxies. Bruce has worked tirelessly in chipping away at vote counting deception for years… making some progress. However, what we are celebrating here are two precedents established that will ease the burden faced by Registered Investment Advisors (RIAs, Investment Advisor or Investment Adviser?) and their clients: Continue Reading →

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SEC Reverses No-Actions Under Rule 14a-8(i)(9) On Request

John Chevedden

John Chevedden

Just a quick note to other shareholders who have filed proxy proposals this season. If the company you filed with requested and obtained a no-action letter from the SEC under Rule 14a-8(i)(9), you might obtain a reversal of that sanctioned exclusion. However, as far as I know, you need to ask for reconsideration. I don’t think the SEC is automatically reversing such letters without being requested to do so by the shareholder proponent. See letters to shareowner activist John Chevedden below.

As previously reported (SEC Withdraws No-Action: Rule 14a-8(i)(9) Suspended), the SEC has essentially suspended Rule 14a-8(i)(9) Conflicts with company’s proposal. Chair Mary Jo White issued the following: Continue Reading →

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SEC Creates Turmoil with Whole Foods No Action on Proxy Access

Proxy Access (P&I)

Pensions & Investments

Apologies to those tired of reading about the issue of proxy access at Whole Foods. However, the SEC’s no action letter is a real watershed moment in the long struggle for proxy access, which began in earnest for me with a rulemaking petition in August 2002 but which others have been puruing for decades. Last Friday I received a letters from the Council of Institutional Investors (CII) and the Marco Consulting Group Trust in support of my December 23, 2014 appeal. (See below or CII site.

I am delighted to see the growing concern and support from investors for my appeal. As has been pointed out in the press, we are now witnessing the beginning of an avalanche of copycat filings. See Continue Reading →

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Road to Proxy Access Altered Again

Road to Proxy Access (Photo by Erik Johansson)

Road to Proxy Access (Photo by Erik Johansson)

… If the stockholder is to regard himself as a continuing part-owner of the business in which he has placed his money, he must be ready at times to act like a true owner and to make the decisions associated with ownership. If he wants his interests fully protected he must be willing to do something of his own to protect them. This requires a moderate amount of initiative and judgment.  – Benjamin Graham and David Dodd, Securities Valuation, 1934

The most fundamental means for shareholders to act like true owners is to help decide who will represent their interests on the board of directors. It is not so much independent directors that shareowners want, but directors who are dependent on our vote – accountable to us, not to the corporate managers they oversee on our behalf.  Obtaining the right to proxy access has been a long and perilous road.

On December 1, 2014, SEC staff effectively cut the road, giving a free pass to every group of entrenched board members and managers that seeks to prevent proxy access and direct accountability to shareowners.  Continue Reading →

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United Natural Foods (UNFI) Moves on Special Meeting Proposal

Manhattan InstituteUnited Natural Foods logoThe Manhattan Institute‘s Proxy Monitor Project would call it another failure by gadfly shareholders, since United Natural Foods Inc. (UNFI) filed and was granted a no-action request by the SEC to exclude our proposal to allow shareowners with 15% of the outstanding UNFI shares to call a special meeting. Since the proposal cannot receive a majority vote from shareowners, the Proxy Monitor Project and SEC Commissioner Daniel Gallagher will count the proposal as a loss for shareowners and a waste of money for the corporation. Continue 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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Quick Bites on Corporate Governance

J. McRitchie

J. McRitchie

CorpGov.net publisher/shareowner activist, James McRitchie in the news.

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Quick Bites on CorpGov

UnknownDon’t miss the following great reads:

 Activist shareholders’ top priorities for 2014. A must read for directors and shareowners alike. Here’s the first paragraph.

Many of us free ride on actions taken by active, long-term shareholders. These unsung heroes goad managers and boards to reach better decisions, make available desirable employment opportunities and, overall, push them to act like good corporate citizens. These active investors accomplish these things by talking to companies, preparing proxy proposals for all shareholders to consider, and offering recommendations on director elections and company-sponsored proxy measures.

Ralph Ward digs past the standard bullshit in his 2014 Boardroom Insider. Always plenty to chew on in a few short pages. Here’s a tidbit, which I hope will leave you wanting more, which includes more tips than you’ll find in pages and pages of other publications aimed at directors. Continue Reading →

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Proxy Advisor Competition at Cisco OK'd by SEC


Mark Latham came up with a brilliant idea in the late 1980s: Shareowners should use their corporation’s funds to pay for external evaluations of governance and performance of the board and management. Shareowners would vote to choose among competing organizations to provide this service.

It was a simple concept but SEC rules made subsequent proposals unnecessarily complex and excluded advice on director candidates, often among the most critical decisions on a proxy. Continue Reading →

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Noteworthy Proposal to Cap Pay Ratio at Microsoft (MSFT)

qube-logomicrosoftA proposal by Qube Investment Management, which owns 10,208 shares of Microsoft ($MSFT), to cap pay has been challenged through the “no-action” process. See incoming correspondence to the SEC. The resolved clause of Qube’s proposal reads as follows:

Resolved: The the Board of Directors and/or the Compensation Committee limit the average individual total compensation of senior management, executives and all other employees the board is chanted with determining Continue Reading →

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Pushback From SEC Staff

“Stunning,” “arbitrary,” “unjustifiied” … “questionable”: these are some of the words individual shareowners are using to describe the SEC handling of six corporations’ requests to be allowed to exclude the USPX model proxy access proposal from their 2012 proxy materials.* This week, the Commission’s staff approved every one of those requests.

Corporate executives routinely solicit SEC staff no-action letters indicating staff will recommend no enforcement action should a company exclude a proposal from its proxy materials. Grounds for excluding proposals are spelled out in Rule 14a-8(i)(9) and include cases where proposals might violate state law, address personal grievances, relate to routine business decisions, etc. Continue Reading →

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Apache: Too Big For SEC Rules?

We all know the drill. Shareowners submit their proposals to corporations for various governance and social concerns. Companies hire lawyers to file no-action requests with the SEC. If the SEC grants their request, they won’t take any action against the company if it does not include the shareowner’s proposal in their proxy. But what if a company just ignores the law? Will the SEC Enforce Rule 14a-8?

SEC Rule 14a-8(g) asks, “Who has the burden of persuading the Commission or its staff Continue Reading →

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Retail Proponents Survive Eligibility Challenges

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.


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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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Of Alter Egos and Solicitations

Broc Romanek, of theCorporateCounsel.net has drawn the attention of his subscribers to an online solicitation by Physicians Committee for Responsible Medicine “to essentially “borrow” shares in an effort meet the eligibility requirements of the shareholder proposal rule and be able to submit shareholder proposals at 11 companies (and thus advance their own social agenda)? Pretty blatant violation of Rule 14a-8(b) in my opinion.”

He thinks that because of their solicitation, “PCRM will have a hard time arguing that it intends to act as somebody’s agent or representative, which is the argument that John Chevedden has successfully made on a number of occasions. In this case, I think PCRM would be ‘dead in the water’ if a company raised an alter ego argument in an exclusion request to Corp Fin.” He’s already heard that a request for exclusion by Starbuck’s was granted by Corp Fin in December. However, as he notes, that was granted on the ordinary business basis, 14a-8(i)(7), and  “the company didn’t make an eligibility argument.”

Romanek is much more expert in these matters than I am but the “alter ego” argument put forth by Gibson Dunn & Crutcher and Wachtell Lipton Rosen & Katz was based on the noting that shareowners serve as Chevedden’s puppets, his “alter egos,” allowing him to circumvent the one proposal per shareholder limit for each meeting under SEC Rule 14a-8 (c) and be heard at meetings where he is not eligible. There is nothing in the solicitation by Physicians Committee for Responsible Medicine indicating they intend to submit more than one proposal at each of the firms with which they express concern.

Frankly, I don’t see anything wrong with trying to find shareowners who are sympathetic to your cause and offering to work with them to submit resolutions. Is that immoral? Illegal? Why?

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