On November 1, 2017, the staff of the Securities and Exchange Commission (“SEC”) issued Staff Legal Bulletin No. 14I, which provides additional guidance for public companies (including retailers) seeking to exclude certain shareholder proposals from their proxy materials. Under this bulletin, the SEC staff now expects boards of directors to analyze shareholder proposals before companies make no-action requests to exclude such proposals from proxy materials under Rule 14a-8(i)(7) (the ordinary business exception) or Rule 14a-8(i)(5) (the economic relevance exception). Those no-action requests should include a discussion reflecting the board’s analysis and the specific processes it employed to reach a well-informed and well-reasoned conclusion. Additionally, new documentation is required of proponents for submissions of shareholder proposals by proxy, and the staff has provided further guidance on the use of images and graphs by proponents in shareholder proposals. Publicly held retailers regularly receive shareholder proposals involving each of these four issues, and the new bulletin suggests that companies may be more successful in excluding related proposals going forward if they comply with new requirements laid out in the bulletin.
