Pension Fund’s Corporate Governance Proposal May Be Excluded from Proxy
The staff of the Division of Investment Management granted a no-action request to exclude from a company’s annual proxy solicitation materials a shareholder proposal (made by a union pension fund) to adopt a detailed succession planning policy. The request to exclude was based on Rule 14a-8(i)(7) which allows the exclusion of proposals that deal with a “matter relating to the company’s ordinary business operations.” As part of its argument, the respondent company noted that its Board already had a Corporate Governance Committee charged with reviewing succession plans.
OUR TAKE: The timing of this No-Action Letter makes it interesting. We expect a flood of shareholder proposals both to funds and by funds addressing issues such as corporate governance and executive compensation. It will be interesting to see whether the Staff narrows the application of the Rule allowing exclusion of these proposals. We recommend that Boards establish a similar Corporate Governance Committee as a defense against these types of shareholder proposals.