When a shareholder submits a resolution, the Securities and Exchange
Commission allows a corporation to omit the resolution under thirteen
different reasons:
(1) Improper under state law: If the proposal is not a proper subject for
action by shareholders under the laws of the jurisdiction of the company's
organization; Note to paragraph (i)(1): Depending on the subject matter,
some proposals are not considered proper under state law if they would be
binding on the company if approved by shareholders. In our experience, most
proposals that are cast as recommendations or requests that the board of
directors take specified action are proper under state law. Accordingly, we
will assume that a proposal drafted as a recommendation or suggestion is
proper unless the company demonstrates otherwise.
(2) Violation of law: If the proposal would, if implemented, cause the
company to violate any state, federal, or foreign law to which it is
subject; Note to paragraph (i)(2): We will not apply this basis for
exclusion to permit exclusion of a proposal on grounds that it would violate
foreign law if compliance with the foreign law would result in a violation
of any state or federal law.
(3) Violation of proxy rules: If the proposal or supporting statement is
contrary to any of the Commission's proxy rules, including §240.14a-9, which
prohibits materially false or misleading statements in proxy soliciting
materials;
(4) Personal grievance; special interest: If the proposal relates to the
redress of a personal claim or grievance against the company or any other
person, or if it is designed to result in a benefit to you, or to further a
personal interest, which is not shared by the other shareholders at large;
(5) Relevance: If the proposal relates to operations which account for less
than 5 percent of the company's total assets at the end of its most recent
fiscal year, and for less than 5 percent of its net earnings and gross sales
for its most recent fiscal year, and is not otherwise significantly related
to the company's business;
(6) Absence of power/authority: If the company would lack the power or
authority to implement the proposal;
(7) Management functions: If the proposal deals with a matter relating to
the company's ordinary business operations;
(8) Relates to election: If the proposal relates to an election for
membership on the company's board of directors or analogous governing body;
(9) Conflicts with company's proposal: If the proposal directly conflicts
with one of the company's own proposals to be submitted to shareholders at
the same meeting;
Note to paragraph (i)(9): A company's submission to the Commission under
this section should specify the points of conflict with the company's
proposal.
(10) Substantially implemented: If the company has already substantially
implemented the proposal;
(11) Duplication: If the proposal substantially duplicates another proposal
previously submitted to the company by another proponent that will be
included in the company's proxy materials for the same meeting;
(
12) Resubmissions: If the proposal deals with substantially the same
subject matter as another proposal or proposals that has or have been
previously included in the company's proxy materials within the preceding 5
calendar years, a company may exclude it from its proxy materials for any
meeting held within 3 calendar years of the last time it was included if the
proposal received:
(i) Less than 3% of the vote if proposed once within the preceding 5
calendar years;
(ii) Less than 6% of the vote on its last submission to shareholders if
proposed twice previously within the preceding 5 calendar years; or
(iii) Less than 10% of the vote on its last submission to shareholders if
proposed three times or more previously within the preceding 5 calendar
years; and
(13) Specific amount of dividends: If the proposal relates to specific
amounts of cash or stock dividends.
A Corporation that decides it wants to omit a shareholder resolution sends a
letter to the Security and Exchange Commission outlining its grounds for
omission. The Security and Exchange Commission staff then sends a letter to
the Corporation advising it as to whether it is likely that the SEC would
take legal action against the Corporation for omitting the resolution. If
the SEC staff agrees with the Corporation it sends the Corporation a
“no-action” letter. This is an advisory letter indicating that the SEC
staff would not recommend to the full SEC that legal action be taken.
SEC “No-action” letters are now being posted at the Center for Political
Accountability. Please review these letters to help determine whether your
resolution is likely to be included or omitted by the Corporation. http://politicalaccountability.net/noa/
