SEC Director of Corporation Finance Elaborates on Proxy Proposals Relating to Social Policy

SEC Division of Corporation Finance ("Division") Director Renee Jones elaborated on recently issued Staff Legal Bulletin 14L ("Shareholder Proposals") pertaining to Rule 14a-8, the "Shareholder Proposal Rule." The bulletin includes matters of social policy. (See generally SEC Diminishes Roadblocks to Proxy Proposals on Social Policy.)

In a speech at CII’s Spring Conference, Ms. Jones stated that one goal of the SEC is to "ensure that the [federal] proxy rules replicate" the voting rights of shareholders present at shareholder meetings. She described the rationale behind providing investors with the ability to include proposals in proxy statements, subject to various conditions, and elaborated on the "ordinary business" exception.

Ms. Jones provided background as the interaction of the ordinary business exception with the SEC's determination that matters of "sufficiently significant social policy" were not inherently excludable under that exception. She stated that the SEC would now regard matters of "social policy," if they are "otherwise related" to a company's business, to be proper subjects for mandatory inclusion in a company's proxy statement, even if the economic relevance to the issuer is limited; ​(e.g., below the five percent threshold).

Ms. Jones also reported that:

• the Division will restart the practice of providing written responses to no-action requests;
• the Division will continue to urge companies to allow shareholders who cannot travel and present their proposals in person, to be permitted to present them using other means because of ongoing COVID-19 concerns; and
• the Universal Proxy Rule will apply to shareholder meetings held after August 31, 2022.