SEC to Withhold Views on Requests to Exclude Shareholder Proposals
After a review of its role in the shareholder proxy proposal process, the SEC Division of Corporation Finance ("Division") decided that it will not evaluate the merits of company submissions of no-action requests, nor express views on a company's intended reliance on rule exclusions, during this upcoming proxy season.
The Division said that upon request, it may issue a letter stating that it will not object to omission of a proposal based solely on the company’s or counsel’s representation. That said, the Division reiterated that it will not assess the adequacy of the company’s rationale and that such responses should not be viewed as staff agreement to exclude a shareholder proposal. The Division added that prior no-action letters remain informal, non-binding views, and that parties should continue relying on existing Commission and staff guidance when evaluating Rule 14a-8 ("Shareholder proposals") exclusions.
The Division added that this process will not apply to precatory, or non-binding, proposals because recent developments involving state-law considerations require staff to continue assessing whether such proposals are an appropriate subject for shareholder action. The Division noted that this exception reflects the limited guidance currently available in this area and is intended to clarify how staff resources will be allocated.
In a statement, Commissioner Caroline Crenshaw warned that the Division’s approach effectively turns "no objection" letters into rubber stamps, since staff will issue them without assessing the merits. She warned that the policy, though presented as neutral, allows companies to more easily exclude proposals and mute shareholder voices. She also criticized the precatory-proposal exception as an institutional choice that encourages companies to rely on state-law opinions to strike broad categories of submissions. Ms. Crenshaw added that the Division’s reliance on existing guidance, while treating prior staff views as non-binding, creates inconsistencies that enable selective use of precedent.