In a significant decision, the staff of the Securities and Exchange Commission today issued a no-action letter concurring that a proxy access shareholder proposal could be excluded from a company’s proxy materials under Rule 14a‑8. The proposal, submitted to Textron Inc. by John Chevedden on behalf of Kenneth Steiner, requested adoption of a bylaw amendment permitting shareholders to include in the company’s proxy materials director candidates nominated by any shareholder(s) that had continuously held one percent of the company’s voting securities for two years or by any group of shareholders “of whom one hundred or more satisfy SEC Rule 14a‑8(b) eligibility requirements.”
The SEC staff’s decision was based on the specific language in the shareholder proposal submitted to the company. The proposal contained seven provisions, which generally outlined the parameters of the proposed proxy access regime. However, one of the provisions deviated from this proxy access theme and instead specified that “[a]ny election resulting in a majority of board seats being filled by individuals nominated by the board and/or by parties nominating under these provisions shall be considered to not be a change in control by the Company, its board and officers.”
In a letter dated March 7, 2012, the SEC staff, concurring with arguments made by Gibson Dunn on the company’s behalf, found that this change-in-control provision constituted a separate proposal and that therefore the submission violated the one-proposal limit in Rule 14a‑8(c). In reaching its decision the Staff noted that the provision did not relate to the inclusion of shareholder nominations in the company’s proxy materials but to “events that would not be considered a change in control,” which is a “separate and distinct matter.”
The SEC staff did not address additional Rule 14a-8 arguments raised in the Gibson Dunn no-action request. Other companies have asserted those arguments in response to similar proxy access shareholder proposals. The SEC staff is expected to decide those no-action requests in the near future.