Cooley commented on and analyzed the apparent limits of the Rule 14a-8(i)(9) "directly conflicts" exclusion based on SEC Corp Fin's recent rejection of a no-action request by American Airlines to omit a John Chevedden proposal requesting the board adopt a 10% threshold for shareholders to call a special meeting. Corp Fin's rejection was based on the fact that at the time the proposal was filed, the company's articles of incorporation and bylaws didn't allow for shareholders to call a special meeting. Upon receipt of the proposal, the board adopted a resolution - subject to shareholder approval - to amend the articles to allow 20% of the shareholder voting power to call a special meeting, and similarly amended the bylaws subject to shareholder "ratification" of the "retention" of the bylaw amendments.
Corp Fin reasoned:
We are unable to concur in your view that the Company may exclude the Proposal under rule 14a-8(i)(9). We note that the Company’s governing documents do not currently permit shareholders to call a special meeting and that the Bylaw Amendments will only become effective upon shareholder approval of the Certificate Amendment. Accordingly, the management and shareholder proposals seek a similar objective; to give shareholders the ability to call a special meeting. Therefore, the proposals do not present shareholders with conflicting decisions such that a reasonable shareholder could not logically vote in favor of both proposals. Accordingly, we do not believe that the Company may omit the Proposal from its proxy materials in reliance on rule 14a-8(i)(9).
In previous instances (e.g., Illumina, AES Corp, CF Industries, and Capital One) since the October 2015 issuance of SLB 14H (which redefined the Staff's position on the Rule 14a-8(i)(9) exclusion), wherein Corp Fin granted no-action requests for exclusion of a shareholder proposal on the basis of that exclusion, the companies' governance documents already included provisions such that a "reasonable shareholder could not logically vote in favor of both proposals" - the test ultimately articulated by Staff SLB 14H based on the history and its understanding of the intended purpose of Rule 14a-8(i)(9).
Access additional resources on our Shareholder Proposals page here.