Shareholder Proposals: Should Corp Fin Referee the No-Action Process?
Here’s a piece that I drafted before Corp Fin made its recent announcement about how it will process Rule 14a-8 requests for shareholder proposals going forward – it’s still worth sharing: Last month, I had lunch with a friend who started foaming at the mouth about the need for Corp Fin to remove itself as the referee in the no-action process for shareholder proposals. After his foam had dried, I replied that Corp Fin would like nothing more. The problem historically has been that whenever Corp Fin suggests that it diminish its role, participants on all sides scream bloody murder.
Processing no-action requests under Rule 14a-8 is labor intensive in Corp Fin. Most requests come in during a short window and are time sensitive. The Staffers working on them still have their regular workload to deal with (at least when I served in Corp Fin). Being placed on the “Shareholder Proposal Task Force” feels like punishment. Long hours. Very long. Highly sensitive situations in some cases – the kind that can derail your career. And not exactly intellectually rewarding.
Here’s an excerpt from the SEC’s adopting release in 1998, the last time the SEC significantly changed Rule 14a-8:
Some of the proposals we are not adopting share a common theme: to reduce the Commission’s and its staff’s role in the process and to provide shareholders and companies with a greater opportunity to decide for themselves which proposals are sufficiently important and relevant to the company’s business to justify inclusion in its proxy materials. However, a number of commenters resisted the idea of significantly decreasing the role of the Commission and its staff as informal arbiters through the administration of the no-action letter process. Consistent with these views, commenters were equally unsupportive of fundamental alternatives to the existing rule and process that, in different degrees, would have decreased the Commission’s overall participation.
-Broc Romanek, TheCorporateCounsel.net October 3, 2019
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