Dodd-Frank
Deere and HP May Exclude Shareholder Proposals Requesting Mandatory Auditor Rotation
Deere and HP received shareholder proposals under Rule 14a-8 requesting that the Company’s Board of Directors and its Audit Committee establish an Audit Firm Rotation Policy that requires that at least every seven years the Company’s audit firm rotate off the engagement for a minimum of three years. There was some speculation that although the SEC has historically allowed companies to omit shareholder resolutions limiting auditor tenure, the SEC may take into account whether recent regulatory initiatives have elevated the issue to a policy matter engendering widespread public debate.
It appears that the SEC has not changed its position. Deere and HP each received a response from the SEC staff stating “Proposals concerning the selection of independent auditors or, more generally, management of the independent auditor’s engagement, are generally excludable under rule 14a-8(i)(7). Accordingly, we will not recommend enforcement action to the Commission if [the Company] omits the proposal from its proxy materials in reliance on rule 14a-8(i)(7).”
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