In the heart of the 2015 proxy season, to the surprise of many, the SEC abruptly indicated that it would express no views on the application of the "conflicting proposal" basis for exclusion under Rule 14a-8(i)(9). This caused confusion among public companies and shareholders and led to many companies including arguably conflicting management and shareholder proposals in their proxy statements. In a Staff Legal Bulletin issued on October 22, 2015, the SEC clarified its view as to when a company may exclude a shareholder proposal that conflicts with a management proposal from its proxy statement under Rule 14a-8(i)(9).
Rule 14a-8(i)(9) permits a company to exclude a shareholder proposal from its proxy statement if that proposal "directly conflicts" with a management proposal. In the Bulletin, the SEC narrowed its view of the application of this exclusion, stating a direct conflict will now exist only "if a reasonable shareholder could not logically vote in favor of both proposals." Unless "a vote for one proposal is tantamount to a vote against the other proposal," there is no basis to exclude the shareholder proposal. Proposals that seek similar objectives through different (and even inconsistent) means will not be viewed as "directly conflicting."
The Bulletin provides examples of when a shareholder proposal would be excludable, including:
The Bulletin also provides examples of when a shareholder proposal would not be excludable because a shareholder could logically vote for both proposals, including:
As we speed toward the 2016 proxy season, public companies should be aware of this development when considering shareholder proposals. If you have any questions, please contact Charlie Goode (616.752.2176; cgoode@wnj.com), Corinne Sprague (616.752.2756; csprague@wnj.com) or any member of the securities law practice group of Warner.
