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Shareholder Proponent Says “Substantial Implementation” Will Backfire

By | March 22, 2016

The SEC recently granted no-action relief to 15 of 18 companies related to shareholder proposals for proxy access.  The basis for the relief was the company had already adopted a proxy access by-law and therefore the shareholder proposal was excludable under Rule 14a-8(i)(10).

Shareholder proponent James McRitchie published a blog post suggesting this tactic will ultimately backfire.  According to Mr. McRitchie:

“Entrenched boards and managers who think they have won by gaming the system with unworkable proxy access bylaws will find only temporary ‘relief’ from shareholder action by filing for an exemption under Staff’s newly defined definition of ‘substantial implementation.’ We will be back next year and every year after that if necessary. Binding bylaw resolutions are much more prescriptive than precatory proposals. Gaming the system is likely to come back to haunt you because your hands will be tied when those resolutions pass… and they will.”

I’m confident Mr. McRitchie will be submitting proposals next year as he described but less confident his proposals will pass.

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