Wachtell Lipton Discusses SEC’s Guidance on Shareholder Proposals

The SEC Division of Corporate Finance recently provided useful guidance on excluding certain Rule 14a-8 shareholder proposals (Staff Legal Bulletin No. 14I).  While helpful, we hope the SEC will undertake a much-needed comprehensive review of Rule 14a-8, including its outdated eligibility requirements.

“Ordinary Business” and “Economic Relevance” Exclusions.  A shareholder proposal relating to a company’s ordinary business operations may generally be excluded from the company’s proxy statement unless significant policy issues transcending ordinary business are involved (Rule 14a-8(i)(7)).  Noting that this exclusion often involves difficult judgment calls (and without addressing the distinction between the SEC’s interpretive approach … Read more