Firm News

SEC Reviewing Rule Regarding Conflicting Proxy Proposals

Author: Kenneth C. Oh

Date: March 19, 2015

Key Contacts

Kenneth C. Oh

Counsel

212-784-6911 koh@sh-law.com

Back

In January 2015, Securities and Exchange Commission Chair Mary Jo White recently directed agency staff to review the scope of Rule 14a-8(i)(9) promulgated under the Securities Exchange Act of 1934 and report to the Commission on its review regarding conflicting proxy proposals.

In light of the directive, the Division of Corporation Finance announced that it would express no views on the application of the rule during the current proxy proposals season.

The Legal Background

Pursuant to Rule 14a-8 of the Exchange Act, shareholders are authorized to submit proposals for inclusion in a company’s proxy materials for a vote at a shareholder meeting. The company must include the shareholder proposal in its proxy statement provided that the shareholder satisfies all of the procedural requirements, and the proposal does not fall under one of the rule’s exclusions.

For instance, Exchange Act Rule 14a-8(i)(9) allows a company to exclude a shareholder proposal if it “directly conflicts with one of the company’s own proposals to be submitted to shareholders at the same meeting.” Under the SEC’s interpretation of the rule, the shareholder proposal does not need to be identical in order to be excluded. Rather, exclusion is permissible if the proposal “would present alternative and conflicting decisions for the shareholders and would create the potential for inconsistent and ambiguous results.”

Questions have recently arisen regarding the application of Rule 14a-8(i)(9) to “proxy access” proposals in which shareholders seek to amend a corporation’s governing documents to allow them to nominate directors to the board. As these proposals have become more prevalent, so have no-action requests seeking to exclude them.

The Implications for Corporations

Given the inability to obtain no-action relief from the SEC, excluding a shareholder proposal on the basis of Rule 14a-8(i)(9) will be more risky during the 2015 proxy season. In addition to a potential SEC enforcement action, companies also run the risk of shareholder suits. Accordingly, corporations should consult with experienced counsel to explore their legal options.

Locations: Red Bank, NJ, Little Falls, NJ, New York City

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

See all

SH Partner Angela Turiano Named Director of Legislative Affairs for SHRM Princeton

Congratulations Angela Turiano on appointment as Director of Legislative Affairs for SHRM Princeton April 17, 2025 – Little Falls, NJ – Scarinci & Hollenbeck, LLC congratulates Partner Angela Turiano on her appointment as Director of Legislative Affairs for SHRM Princeton. Along with serving as a member of SHRM Princeton’s leadership team, Angela will monitor pending legislative, regulatory, […]