As reported earlier this week on Rants to Riches and discussed in detail in Cooley's post, SEC Corp Fin Staff recently denied H&R Block's request to exclude a shareholder proposal to amend its existing proxy access bylaws on the basis of Rule 14a-8(i)(10) (substantially implemented) in circumstances that appear to undermine the series of no-action letters issued earlier this year (previously reported on here and here) that gave some comfort to corporates that companies may exclude proposals on "substantially implemented" grounds provided that certain core proxy access terms sought by the proposal had already implemented by the company despite differences in other terms.
In this new memo, Simpson Thacher notes Staff's apparent distinction between, and related disparate Rule 14a-8(i)(10) treatment of, shareholder proposals seeking adoption of proxy access on specified terms (which were the subject of Staff's early 2016 no-action letters) vs. the proposal at issue, which requests specific changes to H&R Block's existing proxy access bylaw. The firm believes that this latter scenario (i.e., a shareholder proposal requesting specific revisions to an issuer's previously adopted proxy access bylaw) "is unlikely to be viewed as 'comparing favorably with the guidelines of the proposal'" - meaning that the H&R Block scenario should probably not be viewed as an anomaly.
However, the firm also believes - based on this past season's proxy access voting results - that issuers can take comfort in the fact that such proposals will unlikely succeed at the ballot box in the context of existing proxy access bylaws that generally comport with the now-market standards, and should not allow this development to impact their proxy access adoption plans.
Access numerous additional memos and other resources on our Proxy Access and Shareholder Proposals topical pages.