Excluding A Shareholder Proposal? Not So Fast…

The SEC's Division of Corporation Finance recently published Legal Bulletin 14L (CF) (the "Bulletin") providing updated guidance on excluding shareholder proposals under Rule 14a-8 under the Exchange Act.  Specifically, the Bulletin addresses the circumstances under which a company may exclude a shareholder proposal from its proxy materials either because it falls within the "ordinary business exception" of Rule 14a-8(i)(7) or the "economic relevance exception" of Rule 14a-8(i)(5).  The Bulletin rescinded previously issued Staff Legal Bulletins 14I, 14J and 14K after a review of Staff experience applying the guidance in them.  The Bulletin's overall effect will limit the circumstances under which companies may exclude shareholder proposals.  As a result, we expect to see more shareholder proposals concerning climate change and other ESG-related issues in the 2022 proxy season.