On October 16, 2019, the Division issued a bulletin providing guidance on certain issues arising under Exchange Act Rule 14a-8. The bulletin addressed the “ordinary business” exception under Rule 14a-8(i)(7), which allows a company to exclude from its proxy statement certain proposals that “deal[ ] with a matter relating to the company’s ordinary business operations.” The applicability of the exception is based on (1) the subject matter of the proposal and (2) the degree to which the proposal involves the “micromanagement” of the company. A bulletin is not a rule, regulation or statement of the SEC and merely represents the view of the Division.
Regarding the first consideration of determining the applicability of this exception, the Division clarified its approach to provide that the focus should be on whether the proposal deals with a matter relating to the company’s ordinary operations or addresses a policy issue that goes beyond ordinary operations. The Division will take a company-specific approach in determining the significance of a particular issue to a company, as opposed to classifying certain issues as universally significant. As such, documentation of a board of directors’ analysis and discussion of an issue’s significance will assist the Division in determining that a proposal may be excluded, including discussion of the factors outlined in SLB No. 14J, including the following:
- Whether the company has already addressed the issue in some manner, including the differences between the proposal’s specific request and the actions the company has already taken, and an analysis of whether the difference presents a significant policy issue for the company; and
- Whether the company’s shareholders have previously voted on the matter and the board’s views as to the related voting results, and how the company’s subsequent actions, intervening events or other objective indicia of shareholder engagement on the issue bear on the significance of the underlying issue to the company.
Under the second consideration, the Division will review the proposal to see whether it seeks extensive detail or imposes a specific strategy, process or outcome, which would serve to bypass the judgment of management and the board and would support a determination that the proposal involves micromanaging. To support an assertion that a proposal should be excluded due to micromanagement, a company should include an analysis regarding “how the proposal may unduly limit the ability of management and the board to manage complex matters with a level of flexibility necessary to fulfill their fiduciary duties to shareholders.”
The bulletin issued by the Division can be found here.
KMK Law articles and blog posts are intended to bring attention to developments in the law and are not intended as legal advice for any particular client or any particular situation. The laws/regulations and interpretations thereof are evolving and subject to change. Although we will attempt to update articles/blog posts for material changes, the article/post may not reflect changes in laws/regulations or guidance issued after the date the article/post was published. Please consult with counsel of your choice regarding any specific questions you may have.
ADVERTISING MATERIAL.
© 2022 Keating Muething & Klekamp PLL. All Rights Reserved
- Partner
Jim Kennedy practices in the Business Representation & Transactions Group. The focus of his practice is corporate, securities, and financing law, where he has extensive experience in mergers, acquisitions and ...
- Partner
Mark Reuter advocates for business clients in transactions, proceedings and conflicts regulated by federal and state securities laws and stock exchange rules. A partner in the firm’s Business Representation & Transaction ...
- Partner
As a partner in the firm’s Business Representation & Transactions Group, Allie Westfall’s insight and proven analytical skills help translate the complexities of the often-challenging securities laws. Allie’s counsel ...
- Associate
Chris Brinkman practices in the firm's Business Representation & Transactions Group with a concentration in venture capital/private equity, start-ups & growth companies, securities, and mergers and acquisitions. Chris ...
Topics/Tags
Select- Securities Law
- SEC
- Securities Regulation
- Cybersecurity and Privacy Law
- Mergers & Acquisitions
- Coronavirus
- Economic Sanctions
- Ohio LLC Act
- Cybersecurity Regulation
- Nasdaq
- Corporate Law
- Tax Planning
- Corporate Tax
- Paycheck Protection Program
- Dodd-Frank
- IRS
- JOBS Act
- FAST Act
- Proxy Access Rules
- Securities Litigation
- Consumer Protection Act
- Corporate Governance
- SEC Enforcement
- Crowdfunding
- Cryptocurrency
- Taxation
- Hedging
- Private Offerings
- Real Estate Law
- Conflict Minerals
- Emerging Growth Companies
- Investors
- Pay Ratio Disclosure
- Intellectual Property
- Technology
- Whistleblower
- Opportunity Zone
- LIBOR
- Accredited Investors
- Sales Tax
- United States Supreme Court
- Online Trading Platforms
- IPO
- Registration Statement
- Executive Compensation
- Health Care Act
- Annual Reports
- Ohio Foreclosure Reform
- Director Compensation
- Family-Controlled Entities
- Gift and Estate Transfers
- Wall Street Reform
- Board of Directors
- Director Independence
- Clawback Rules
- Total Shareholder Return
- Cyber Insurance
- Data Breach
- Lenders
- Receivership Statute
- Regulation A
- Regulation D
- Compensation Committee Certification
- Government Shutdown
- CDEs
- CDFI Fund
- Community Development Entities
- Community Development Financial Institutions Fund
- New Markets Tax Credit
- NMTC
- NMTC Financing
- Regulation Fair Disclosure
- Social Media
- Benefits
- Healthcare Reform
- Litigation
- Marketing
- Public Company Transition Rules
- Employment Incentives
- HIRE Act
- Social Security Tax
- Tax Credit
Recent Posts
- SEC Provides Sample Guidance on Disclosure of Russia-Ukraine Invasion
- Proposed SEC Climate-Related Disclosure Requirements
- Proposed SEC Cybersecurity Rules
- International Unrest and its Impact on M&A
- The United States Ramps Up Severe Economic Sanctions on Russia and Export Controls
- Revised Ohio LLC Statute
- Beware of ‘Spring-Loaded’ Awards: SEC Issues Updated Accounting Guidance
- SEC Opens Floodgates for ESG Proposals
- NYSE Proposes an Amendment to the Shareholder Voting Requirement
- SEC Charges Pearson plc for Misleading Investors About Cyber Breach and Inadequate Disclosure Controls