Blogs

Skadden's "The Impact of SEC Staff Guidance on Shareholder Proposals Leaves a Murky Path Forward" presents a somewhat sobering but highly instructive account of how no-action requests have fared in practice in the context of the SEC's Staff Legal Bulletin (SLB) 14I (reported on here, here, here, here, and here) and SLB 14J (reported on here) released in November 2017 and October 2018, respectively.

Among the key takeaways based on the firm's analysis of SLB 14I and 14J-relevant 2018 and 2019 proxy season no-action requests and staff responses are: (i) companies' general reluctance to press their boards to incur the time and other resources for a board analysis to support a no-action request is certainly justified given their apparent lack of success, although inclusion of such an analysis may still make sense in certain (probably limited) circumstances; and (ii) properly presented no-action requests based on the micromanagement prong of the ordinary business exclusion appear much more likely to be granted than they were historically.

Skadden sums it up:

SLB 14J and Staff no-action decisions from the 2019 proxy season provide important guideposts, but the path forward on many shareholder proposals remains murky. The Staff seemingly wants companies to include a board analysis but, except in the narrowest of circumstances, has been hesitant to concur with one. And though the Staff’s evolving views on micromanagement hold promise, the availability of a successful argument relies heavily on the specific proposal’s request rather than its subject matter. Finally, it remains to be seen whether SLB 14J will have any meaningful impact or utility with respect to proposals addressing aspects of senior executive compensation available to the general workforce.

These items, together with the inclusion of potential amendments to Rule 14a-8 on the SEC’s near-term rulemaking agenda, will continue to create uncertainty and unpredictability for companies and shareholder proponents alike.