Further to this week's Society Alert report on the "Shareholder Proposals: What Now" webcast held today on TheCorporateCounsel.net featuring SEC Division of Corporation Finance Chief Counsel David Fredrickson, Davis Polk’s Ning Chiu, Morrison & Foerster’s Marty Dunn, and Gibson Dunn’s Beth Ising, key takeaways included:
- Shareholder proposal release - SEC's Division of Corporation Finance Chief Counsel David Fredrickson provided an overview of the recently issued shareholder proposal release. He noted several of the same drivers of the proposed reforms that SEC Chair Clayton mentioned in his recent Distinguished Jurist Lecture remarks at the University of Pennsylvania (we reported on here), including changes in level and ease of shareholder engagement, as well as a need to update the shareholder ownership threshold requirements to effect a rebalancing of costs and benefits associated with the shareholder proposal process, which involves a cost-shifting of burdens of soliciting proxies from proponents to companies.
As to whether the SEC may entertain any requests to extend the release comment deadline, David indicated uncertainty, but noted that any extension would require further Commission action. Importantly, however, he reminded interested stakeholders that the SEC's practice is to accept and review comment letters even after the comment period closes until it acts, and that those who wish to comment on this proposal should act accordingly.
- Change in no-action process - Ning Chiu clarified that "oral responses" as described in the Staff's September announcement about the changes in the no-action process (reported on here) may be better characterized as informal responses since the Staff’s now-planned approach is to e-mail both parties (company and proponent) to inform them that its decision will be posted on the SEC's website. Staff responses to no-action requests are being publicly disclosed on the website via this chart, which will indicate either that Staff concurs, along with the 14a-8 bases for that decision, or Staff disagrees, along with all relevant no-action correspondence.
David reiterated the information from the announcement that Staff's declining to state a view should not be interpreted as indicating that the proposal must be included in the proxy, i.e., it does not mean "no" or a coy "no." Rather, if Staff means no, they will say "no" (or words to that effect). While he can't predict how many no-action requests will trigger which form of Staff response - concurs, disagrees, or declines to state a view - he anticipates generally that issues that are relatively well-settled in prior no-action letters will receive informal responses, whereas those requests that present either novel, cutting edge issues or issues that likely can't or won't be benefited from a securities law analysis will trigger either a written response or a declination to state a view.
As noted in yesterday's weekly Society Alert, we will be posting on our website, blogging, and including in a future Society Alert a transcript of the webcast as soon as it is available.
Register for our December 9 Corporate Practices Committee-hosted webcast on these topics, including litigation risks and proxy advisor reactions and associated proxy disclosure tips, here.