The Securities and Exchange Commission, which as reported by the Center, has issued an increased number of No-Action Letters in 2017, has continued to hold the line on proxy access proposals, continuing the enforcement policy started under previous Chair Mary Jo White which makes it easier for shareholders to band together to nominate a candidate to the Board. In 2015, the SEC made a notable change in how it analyzed No-Action requests for shareholder proposals which were touching on the same subject matter as a management proposal. (Under the no-action process, a company can seek an informal SEC staff opinion that if the company excludes a shareholder resolution from its proxy under SEC rules, the Staff will not recommend enforcement action against the company.) At the time, proxy access was a major focus of shareholder proponents as several investors, including the New York Comptroller's Office, pushed to make proxy access a best practice. Several companies sought to avoid a debate and made an effort to implement proxy access on their own terms, and thus offered management proposals on proxy access and then sought to exclude any shareholder proposals addressing the same subject. The SEC denied the requests to exclude the proposals, touching off a period of corporate uncertainty about whether certain proposals would be excludable. Two years later, many companies have implemented proxy access policies as part of an emerging best practice. However, shareholder proponents are not always satisfied with the terms of the proxy access policies which the companies have implemented and have continued to submit shareholder proposals calling for the companies to make changes to existing policies.
For 2017, the specific provision which has been targeted by shareholder proponents is the number of shareholders which are allowed to pool their shares together to hit the ownership threshold requirements needed to submit candidates under the proxy access policy. As reported by Davis Polk this week,the SEC has continued to refuse to exclude shareholder proposals which seek to expand the number of shareholders under the company's proxy access policy who can join the pool to hit the ownership threshold requirements, unless the company can show that their proxy access bylaws provide for similar rights as the proposals. Companies have sought to exclude the proposals under the SEC’s rule that proposals that have been “Substantially Implemented” may be excluded from the proxy. Where a shareholder sought to increase the number of investors from 20 as provided under the company’s bylaws to an unlimited number, the SEC has refused to agree that the company had substantially implemented the requirement. The SEC's actions show, that despite being under Republican leadership, some of the policy changes at the Staff level which were established under former Chair Mary Jo White, will continue going forward, at least for the present time