U.S. Securities and Exchange Commission, p. 3
More recently, in
Staff Legal Bulletin No. 14L
(November 3, 2021) (“SLB No. 14L”),
the Staff rescinded prior guidance that a company may exclude a shareholder proposal in respect
of its ordinary business operation if the proposal did not raise a policy issue that was significant to
a particular company. In SLB No. 14L, the Staff realigned its approach for determining whether a
proposal relates to ordinary business to provide an exception for proposals that raise significant
social policy issues that transcend the ordinary business of the company. In explaining the change,
the Staff noted, “[W]e have found that focusing on the significance of a policy issue to a particular
company has drawn the Staff into factual considerations that do not advance the policy objectives
behind the ordinary business exception,” which “did not yield consistent, predictable results.”
In addition, in SLB No. 14L, the Staff provided guidance on its position on
micromanagement when evaluating requests to exclude a proposal on that basis under the ordinary
business exception. The Staff stated that it will no longer view proposals that seek detail or seek
to promote timeframes or methods as
per se
micromanagement. Instead, the Staff will focus on
the level of detail and granularity sought in the proposal and may look to well-established
frameworks or references in considering what level of detail may be too complex for shareholder
input. The Staff also noted that it will look to the sophistication of investors generally, the
availability of data and the robustness of public discussion in considering whether a proposal’s
matter is too complex for shareholders, as a group, to make an informed judgment.
2)
The Proposal may be excluded because it involves issues within the Company’s
ordinary business operations.
The Commission has stated that a proposal requesting the dissemination of a report is
excludable under Rule 14a-8(i)(7) if the substance of the proposal is within the ordinary business of the
company.
See
Exchange Act Release No. 34-20091 (Aug. 16, 1983) (“[T]he staff will consider whether
the subject matter of the special report or the committee involves a matter of ordinary business; where
it does, the proposal will be excludable under Rule 14a-8(c)(7).”);
see
also
Rite Aid Corporation
(May
2, 2022) (permitting exclusion under Rule 14a-8(i)(7) of a proposal that requested a report on the
Company’s customer service ranking within the drugstore industry);
Netflix, Inc.
(Mar. 14, 2016)
(permitting exclusion under Rule 14a-8(i)(7) of a proposal that requested a report describing how
company management identifies, analyzes and oversees reputational risks related to offensive and
inaccurate portrayals of Native Americans, American Indians and other indigenous peoples, how it
mitigates these risks and how the company incorporates these risk assessment results into company
policies and decision-making, noting that the proposal related to the ordinary business matter of the
“nature, presentation and content of programming and film production”).
The Staff has also consistently permitted exclusion of shareholder proposals
relating to a company’s general legal compliance program.
See
,
e.g., JPMorgan Chase & Co.
(Mar.
21, 2023) (permitting exclusion under Rule 14a-8(i)(7) of a proposal requesting a report on “the
[c]ompany’s policy in responding to requests to close, or in issuing warnings of imminent closure
about, customer accounts by any agency or entity operating under the authority of the executive
branch of the United States Government.”);
Eagle Bancorp, Inc.
(Mar. 29, 2022) (permitting
exclusion under Rule 14a-8(i)(7) of a proposal requesting an independent review of certain
investigations performed by the company);
Navient Corp.
(Mar. 26, 2015, recon. denied Apr. 8,
2015) (permitting exclusion under Rule 14a-8(i)(7) of a proposal requesting “a report on the
