April 14, 2003

The Commission declined today to

The Commission declined today to review the staff’s position that a registrant may exclude from its proxy statement a shareholder proposal seeking to allow any beneficial owner of 3% or more of the outstanding stock to propose a board nominee for inclusion in the registrant’s proxy statement. The American Federation of State, County and Municipal Employees had requested that the Commission reverse the staff’s position (expressed in a no-action letter to Citigroup) that such a proposal relates to an election of directors and therefore is excludable under Rule 14a-8(i)(8). At the same time, the Commission asked the staff for a report on all rules and intepretations relating to the election of directors and recommendations for improving shareholder participation. The report is to be based on the input of all interested constituencies, and is due July 15. The Commission’s press release is available at

This is a hot governance topic, and at least one Commissioner has expressed sympathy for AFSCME’s position in recent speeches.

If shareholder proponents win the right to include alternative nominees in the registrant’s proxy statement, the nature of election contests will change dramatically. So, expect this issue to receive major shareholder and media attention.