On January 16, Securities and Exchange Commission Chair Mary Jo White announced that she has directed the SEC’s staff (Staff) to review Rule 14a-8(i)(9) promulgated under the Securities Exchange Act of 1934, which allows an issuer to exclude a shareholder proposal that “directly conflicts” with one of the issuer’s own proposals. Chair White’s directive is a result of uncertainty created by the Staff’s no-action letter issued to Whole Foods Market, Inc., which is described in detail in the Corporate and Financial Weekly Digest edition of December 12, 2014.
Following the Staff’s release of the Whole Foods’ no-action letter, other issuers requested similar no-action relief regarding exclusion of “proxy access” shareholder proposals from their proxy statements on the basis that such issuers planned to offer competing proposals. Commenters noted that the Staff’s position articulated in the Whole Foods’ no-action letter could allow issuers to avoid virtually any shareholder proposal by putting forth a competing proposal, including a proposal that is much less favorable to shareholders.
In connection with Chair White’s announcement, on January 16, the Staff (1) retracted its prior no-action position with respect to the Whole Foods shareholder proposal, now expressing no view as to whether Whole Foods could properly exclude the shareholder proposal in question under Rule 14a-8(i)(9), and (2) announced that, in light of Chair White’s directive, it would not express any view on the application of Rule 14a-8(i)(9) in the 2015 proxy season. As a result, if an issuer excludes a proposal based on Rule 14a-8(i)(9), it will have no assurance that it will not be subject to an SEC enforcement action as a result of such exclusion. In any event, if the proponent of the proposal pursues litigation against the issuer, the final determination of whether the proposal may be excluded pursuant to Rule 14a-8(i)(9) will ultimately be made by a US federal court.
Chair White’s statement is available here.
The Staff’s retraction letter is available here.