December 20, 2004

Disney Appeals Corp Fin Decision To Not Exclude Access-Type Proposal

Last week, it was widely reported that Disney submitted an appeal to the Commissioners seeking an overturn of Corp Fin’s decision to not exclude a shareholder proposal. The shareholder proposal – co-filed AFSCME, Calpers, Illinois State Board of Investment and the New York State Common Retirement Fund – requests that Disney essentially becomes subject to proposed Rule 14a-11, which could allow shareholder groups that have held more than 5% of Disney’s outstanding common shares for more than two years to nominate up to a specified number of candidates who are independent from both the nominating shareholder and from Disney for election to the board.

Among its arguments, Disney notes that Corp Fin allowed the exclusion of similar proposals at Qwest Communications and Verizon Communications based on the exclusion basis in Rule 14a-8(i)(8) (that basis permits the exclusion of shareholder proposals if they “relate to the an election for membership on the company’s board of directors or analogous governing body”).

However, the Commissioners might be able to distinguish those no-action responses from last year – because the proponents in those instances did not closely mirror the procedures set forth in proposed Rule 14a-11. As proponents in later years typically do based on experience, the proponents in Disney could have made the necessary tweaks to the procedures in their proposal to avoid exclusion – particularly in light of footnote 74 in the shareholder access proposing release (which states that the Commission intends to amend Rule 14a-8(i)(8) so that proposals that make companies subject to the Rule 14a-11 framework are specifically non-excludable).

SEC Forms Advisory Committee on Smaller Public Companies

Late last week, the SEC formed an Advisory Committee on Smaller Public Companies to examine the impact of Sarbanes-Oxley and other aspects of the federal securities laws on smaller public companies. Heading this committee up will be Katten Muchin partner Herb Wander and Jim Thyen, CEO of Kimball International, with between 11 and 21 members to be named soon (representing the varied interests affected by the range of issues to be considered).

Trivia – Here is the process by which the SEC can form such a committee – an advisory committee can be established 15 days after publication of a notice in the Federal Register by then filing a committee charter complying with the Federal Advisory Committee Act with Congress. I learned something today!

Waxing Nostolgic About 450 5th Street

After Friday morning’s ASCS Securities Law meeting with the Corp Fin staff, I decided to hang around for the annual SEC holiday party. As I chatted in Room 1C30, I couldn’t help but reflect on all the good times at 450 5th Street as the SEC prepares to move into its new quarters sometime next year.

When I was a SEC Staff, I recall old-timers talking about the locations where the SEC used to reside – and me not caring all that much. I’m sure that’s how it will be for the hundreds of new staffers that now grace the SEC’s halls.