January 23, 2007

SEC Posts E-Proxy Adopting Release

Yesterday, the SEC finally posted the 110-page adopting release regarding E-Proxy – or as it’s also called: “Internet availability of proxy materials.” These rules were adopted more than a month ago at a December 13 open meeting.

The new rules cannot be used before July 1, 2007 (which means a notice under the new rules cannot be sent to shareholders before then) – given that the notice period under the new rules is 40 days, this new notice and access model cannot be used for meetings scheduled before August 10th. As you may recall, these rules are optional and I bet it will take time for the proxy intermediaries to tweak their systems to allow for the new model. We will cover these new rules in a webcast – including what these tweaked systems look like – in a few months…

SEC Proposes Extension of E-Proxy to “Universal” Status

Yesterday, the SEC proposed amendments to E-Proxy that would require issuers and other soliciting persons to furnish proxy materials to shareholders by posting them on a web site and providing shareholders with notice of the Internet availability of the proxy materials. Comments are due 60 days after publication in the Federal Register.

Back in December at the open Commission meeting, this was referred to as “mandatory” e-Proxy, but that was a bit of a misnomer and I believe the proposing release doesn’t even mention the term “mandatory,” it’s coined “universal” instead – because compliance with the proposal would be so simple: merely posting proxy materials and providing notice of the URL. This change in terminology is helpful to understand what the SEC is proposing; I butchered my interpretation of what “mandatory” meant in a blog last month when the SEC first mentioned it. I can be a space cadet sometimes…

Corp Fin Expresses “No View” in Hewlett-Packard Shareholder Access Response

Yesterday, Corp Fin made public its highly anticipated no-action response letter staff to Hewlett-Packard regarding the AFSCME shareholder proposal seeking a by-law amendment that would allow for a form of shareholder access. It has been reported that this was the only shareholder access proposal submitted to an issuer this proxy season (although this Washington Post article intimates that two other companies have received this proposal). We have posted a copy of Corp Fin’s response in our “Majority Vote Movement” Practice Area.

Since the SEC is still grappling with how to respond to the Second Circuit’s decision regarding a similar proposal that AFSCME submitted last year to a handful of companies, the Staff decided not to express a view as to whether Hewlett-Packard can exclude the proposal from its upcoming shareholders’ meeting.

In deciding to pass on considering a proposal relating to this matter at a January 31st open Commission meeting as expected, SEC Chairman Cox said, “The SEC staff quite properly are following Commission precedent, expressing no view as to the eventual disposition of what is for the moment an unsettled legal question. Fortunately, during the current proxy season, the very small number of inquiries we have received have come solely from companies representing that they are not governed by the decision in the Second Circuit, so in the near term there is no risk of conflicting application of our rules. As a result, the Commission is taking advantage of this opportunity to consider more fully the questions raised by the court decision in their broader context, and to work on crafting a carefully considered proposal that will ensure there is one, clear rule to protect investors’ interests in all jurisdictions during the next proxy season.” So it looks like the SEC is still debating internally what it should do in this area…

What is a “No View” Response from the Staff?

It’s not surprising that the Staff decided to go with a “no view” response here, as the Staff has refused to take a position over the years when a close call is involved if the governing law is unclear.

Although a “no view” response may provide some comfort to a company that the SEC will not bring an enforcement action if it excludes the proposal, it is probably more likely that a court would compel inclusion since there is no Staff decision for a court to defer to – or consider – in making its decision…albeit the courts haven’t been following the SEC’s lead anyways in recent decisions, like the AFSCME one. Hewlett-Packard is expected to file its proxy materials within a few days and it will be interesting to see what appetite for risk they have after the pre-texting scandal.