May 29, 2013

Shareholder Proposals: Chevedden Loses “Proposal by Proxy” Case

Recently, a Texas judge granted summary judgment to Waste Connections in Federal District Court for the Southern District of Texas after the company had filed suit seeking a declaratory judgment to exclude a shareholder proposal from John Chevedden purportedly on behalf of Jim McRitchie and Myra Young. There is no court opinion – just the pleadings and summary judgment order. However, this Rule 14a-8(j) exclusion notice to Corp Fin from Waste Connections includes the company’s side of the story.

The complaint filed by Waste Connections alleged that Chevedden himself did not own any shares of the company and argued that his proposal was improper because Rule 14a-8 doesn’t permit a shareholder to grant a proxy to another person for that other person to submit a shareholder proposal. This “proposal by proxy” issue is not new. For example, it was the basis for an exclusion request in this Ameriprise Financial no-action letter from late 2012 in which Corp Fin did not grant exclusionary relief when Chevedden filed a proposal “on behalf of” Kenneth Steiner.

So the Texas court reached a different conclusion from the Corp Fin Staff. As one member puts it, the takeaway is the increasing perception that companies might fare better in federal court than before the SEC Staff.

Interestingly, the complaint notes that John has submitted more shareholder proposals than anyone in history, accounting for more than 11% of all shareholder proposals considered by Corp Fin in the no-action process during that time (879 out of 6958 proposals).

Annual Meetings: Don’t Bar the Press

Best way to get negative press about your annual meeting? Bar the press. This Pittsburgh Gazette article perfectly illustrates the point as a company gets slammed for barring the press. Only five shareholders attended the meeting. Was the bar worth it? I highly doubt it.

And its a practice pointer made time and again during my annual webcasts on conducting annual meetings. Also see our checklist on annual meetings and the press…

Here’s an interesting article from an Australian director entitled “The AGM is badly broken.”

More on our “Proxy Season Blog”

We continue to post new items regularly on our “Proxy Season Blog” for members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:

– Corp Fin Declines to Exclude Proposals on Basis of Inflammatory or Incorrect Supporting Statements
– Unbundling Lessons Learned from the Apple Case
– Apple: Judge Dismisses Say-on-Pay Injunction Request
– A European Report on Proxy Advisors
– Climate Risks at Banks: Corp Fin Doesn’t Allow Shareholder Proposal Exclusion

– Broc Romanek