SEC's Mixed Guidance on CSR Shareholder Proposals Featured in Law360's Gump Article Publication
In a recent article published by Law360, titled "Understanding SEC's Mixed Guidance On Apple Proposals," Gump counsel Kimberly Myers, partner Daniel Feldman, and law clerk Thor Petersen discuss the importance of demonstrating the insignificance of CSR-related issues or the micromanagement aspect for companies wishing to exclude such proposals from their proxy materials.
The article first appeared as a blog post on AG Deal Diary and focuses on the U.S. Securities and Exchange Commission's (SEC) Legal Bulletin 14I, which articulates a framework for companies to determine whether they may exclude shareholder proposals, including CSR-related proposals, from proxy materials under the 'ordinary business' exception (Rule 14a-8(i)(7)).
According to the article, companies can exclude a CSR-related shareholder proposal under the "ordinary business" exception if the proposal seeks to micromanage their day-to-day operations. However, proposals that address issues that transcend day-to-day business matters without seeking to micromanage the company's operations may not be excluded from proxy materials under this exception.
The article emphasizes that shareholder proposals should focus on policy issues that are significant to the company and not request action that is too specific or seeks to control day-to-day operations. Myers, Feldman, and Petersen suggest that companies should be prepared to provide evidence and arguments to support their claims of insignificance or micromanagement if they wish to exclude a CSR-related shareholder proposal.
The article discusses two shareholder proposals from Apple related to corporate social responsibility (CSR). The specific proposals from Apple included one pertaining to greenhouse gas emissions and another on human rights. The SEC gave differing rulings on these proposals, and the rulings appear consistent with the recently issued legal bulletin from the SEC.
However, the article does not delve into the potential consequences for companies that fail to follow the SEC's guidelines on excluding CSR-related shareholder proposals, nor does it discuss the potential reaction of shareholders or activist groups to the SEC's rulings on Apple's shareholder proposals.
Furthermore, the article does not provide specific examples of companies that have successfully excluded CSR-related shareholder proposals based on the "ordinary business" exception, nor does it discuss the potential impact of the SEC's rulings on Apple's shareholder proposals on future CSR-related shareholder proposals.
In conclusion, the article reiterates the advice given in Legal Bulletin 14I, where companies must show that a proposal does not address issues that are significant to their operations or seeks to control their day-to-day operations to exclude it under the "ordinary business" exception. It serves as a valuable resource for companies navigating the process of excluding CSR-related shareholder proposals from their proxy materials.
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