No-Action Letter Requests To The SEC: Installment V

April 14, 2014

Reuters ImageAs shareholder proposal season draws to a close, the Business Law Center Experts on-Call present a final no-action letter tracking report and some accompanying analysis.

Highlights of the season include:

  • A decrease in the number of no-action letter requests: This year’s total of 275 letters is 15 fewer than last season and 20 fewer than the 2011-2012 season. The number of registrants submitting no-action requests has declined as well, from a high of 182 in 2011-2012 to only 159 this season. The number of proponents, however, has remained relatively stable: 117 in 2011-2012, 134 in 2012-2013, and 113 in 2013-2014.
  • Changes in the mix of proponents: As in previous years, most proponents are individual shareholders, but activist funds have replaced labor and pension organizations as the next-most prolific proponent group.  Religious organizations submitted far fewer proposals than in previous seasons, while public policy organizations submitted more. The number of letters submitted by individual shareholders has remained relatively constant (148 in 2011-2012, 140 in 2012-2013, and 149 this season), but with every season more of those letters are submitted by John Chevedden (40 in 2011-2012, 64 in 2012-2013, and 77 this season).
  • Defections from the ranks of habitual no-action requesters: While a few companies (General Electric, AT&T, and Verizon) have consistently submitted numerous no-action requests during every season surveyed, some formerly prolific companies (First Energy, Bank of America, and ExxonMobil) disappeared from this season’s survey.
  • Fewer proposals on executive compensation and political contribution disclosure: After last season’s peak (64 proposals), executive compensation proposals have receded back to 2011-2012 levels (36 proposals in 2011-2012, and 40 proposals in 2013-2014). Environmental matters and board chair independence continue to jockey for second place, while proposals calling for more transparency regarding corporate political contributions declined to 20, from 32 last season and 31 the season before.

 

No-Action Letter Tracker: March 31, 2014:

 

2013-2014 Season (as of 3/31/14) 2012-2013 Season (as of 3/31/13) 2011-2012 Season (as of 3/31/12)
1. Registrants Submitting the Most No-Action Requests
Dominion Resources 10 General Electric 11 General Electric 10
JPMorgan Chase 10 Dominion Resources 8 ExxonMobil 8
Verizon 9 First Energy / Verizon 7 AT&T / Bank of America / JPMorgan 6
General Electric 9 AT&T / B of A / Comcast 6
2. Proponents Most Frequently Cited in No-Action Letters
J. Chevedden & collaborators 77 J. Chevedden & collaborators 62 J Chevedden 40
Qube Inv. Mgmt 21 United Bro. Carpenters / NY State Comptroller 12 W & K Steiner 28
National Ctr. for Public Policy Research / New York State Common Retirement Fund 15 AFL-CIO / NY State Common Retirement Fund 9 United Bro. Carpenters 18
NYS Ret. / NYC Ret. / AFL-CIO 10
3. Number of Letters by Proponent Type
Individuals 149 Individuals 140 Individuals 148
Activist Funds 51 Labor & Pension Funds 76 Labor & Pension Funds 76
Labor & Pension Funds 34 Activist Funds 27 Activist Funds 30
Public Policy Orgs 21 Religious Organizations 23 Religious Organizations 19
4. Most Common Proposal Subjects
Executive Compensation 40 Executive Compensation 64 Executive Compensation 36
Environmental Matters 34 Environmental Matters 41 Environmental Matters 36
Independent Board Chair 24 Political Contributions 32 Political Contributions 31
Political Contributions 20 Independent Chair 23 Other Governance / Special Meeting Power 26
5. Totals
No-Action Requests 275 No-Action Requests 290 No-Action Requests 295
Number of Registrants 159 Number of Registrants 164 Number of Registrants 182
Number of Proponents 113 Number of Proponents 134 Number of Proponents 117

 

Resolved Letters

272 letters resolved: 59 withdrawn, 2 lawsuits; 211 received an SEC ruling.

 

Ruling breakdown:

SEC concurred with registrant (proposal is OUT): 149 – 71%

SEC was unable to concur with registrant (proposal is IN): 62 – 29%

 

Grounds for Exclusion: All Proposal Types

 

Rule Section Exclusion Grounds Total Out In Success Rate
14a-8(i)(3) Vague, misleading, unsupported by fact

64

25

39

39%

14a-8(b) Inadequate proof of ownership / holding

48

37

11

77%

14a-8(i)(7) Relates to ordinary business

39

25

12

64%

14a-8(i)(10) Substantially implemented

34

19

15

56%

14a-8(i)(9) Conflicts with company proposal

18

17

1

94%

14a-8(e) Late

16

9

7

56%

14a-8(i)(11) Previously included

9

6

3

67%

14a-8(i)(4) Redress of personal grievance

8

2

6

25%

14a-8(i)(2) Conflicts with law

8

2

6

25%

14a-8(i)(12) Previously voted down

5

4

1

80%

14a-8(i)(8) Involves election of directors

5

4

1

80%

14a-8(i)(13) Requests specific dividend amount

4

4

0

100%

14a-8(i)(1) Not a proper subject for shlder proposal

4

2

2

50%

14a-8(c) Proponent made multiple proposals

3

3

0

100%

14a-8(h) Failed to present at meeting

2

1

1

50%

14a-8(i)(6) Co. lacks power to implement

2

0

2

0%

14a-8(i)(5) Involves less than 5% of assets

1

0

1

0%

14a-8(d) Exceeds 500 words

1

0

1

0%

 

Most-cited grounds for excluding proposals, by proposal type:

 

Executive Compensation (10 in, 24 out, 6 withdrawn):

  • Proponent failed to prove ownership: 63%

Environmental Matters (11 in, 14 out, 9 withdrawn):

  • Proposal was vague, or misleading: 29%
  • Proposal concerns matters of ordinary business: 21%
  • Proposal has been substantially implemented: 21%

Independent Chairman of the Board (13 in, 6 out, 5 withdrawn)

  • Proponent failed to prove ownership: 50%
  • Proposal has been substantially implemented: 33%
  • Proposal was vague, or misleading: 33%

Matters Relating to Corporate Political Contributions (6 in, 7 out, 7 withdrawn)

  • Proponent failed to prove ownership: 57%