SEC Staff Guidance On Shareholder Proposals: A Murky Path Forward

In November 2017, the staff of the Division of Corporation Finance (Staff) of the Securities and Exchange Commission (SEC) issued guidance concerning companies' ability to exclude shareholder proposals from their proxy statements under the "ordinary business" and "relevance" grounds of Rule 14a-8. In particular, Staff Legal Bulletin No. 14I (SLB 14I) invited companies to include in their no-action requests their board's analysis of the significance of a proposal under these exclusions, emphasizing that a well-developed discussion of that analysis would assist the Staff in its review of these requests. Virtually every company that went down this path, however, was unsuccessful, and after the 2018 proxy season many questioned the utility of providing a board analysis.