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If the comment letters from the likes of the Council of Institutional Investors, the Colorado Public Employees’ Retirement Association, and the NYC Comptroller weren’t enough to convince you that a contingent of shareholders strongly supports the SEC’s proposed amendments to the Rule 10b5-1 affirmative defense, then perhaps the vote last week on a first-of-its kind shareholder proposal will do the trick. From the Form 8-K reporting voting results at Abbott Laboratories’ annual meeting:

The shareholders rejected a shareholder proposal that Abbott’s Board of Directors adopt a policy on Rule 10b5-1 plans with certain restrictions and disclosure requirements, with 48.76 percent of the votes cast voting “For” the proposal.

The proposal was submitted by the NYC Comptroller and called for a policy for Rule 10b5-1 plans that would require:

1. A “Cooling Off Period” of at least 120 days between Plan adoption and initial trading under the Plan.

2. An “Overlapping Plan Prohibition” preventing an individual/entity from having multiple Plans simultaneously.

3. Named Executive Officers and Directors to disclose on the Company’s proxy statement the number of shares subject to a Plan.

4. Whenever a Section 16 corporate officer or director adopts, modifies, or cancels a Plan, a Form 8-K disclosure indicating the name of the affected individual, the number of shares covered, and the date of adoption, modification, or cancellation of the Plan.

5. Disclosure on Form 4 of whether a trade was made under a Plan, and the Plan’s adoption or modification date.

It’s a big deal when the first iteration of a shareholder proposal comes close to passing, even if it doesn’t make it quite all the way there. This one is particularly notable because it was based on the recommendations of the Commission’s Investor Advisory Committee and it includes several features that ended up being part of the SEC’s rule proposal – e.g., a 120-day cooling-off period, a prohibition on overlapping plans, and additional disclosure. ISS and Glass Lewis both recommended voting for the proposal.

Abbott’s board did not support the proposal, saying that they already have policies and limitations in place to guard against insider trading (30-day cooling off period, pre clearance, no trades during blackouts, Form 4 footnotes, etc.) and that the proposal would disadvantage the company by having it go well beyond current market practices for trading plans and, in some ways, beyond the SEC’s pending rule proposal.

Abbott’s statement of opposition doesn’t directly say whether the company supports the SEC’s proposal. But it cautions against over-burdening parameters for trading plans, and that is not out of step with general corporate sentiment – through comment letters on the rule proposal, dozens of other companies & corporate advisors have indicated that aspects of the proposal would be overly burdensome and actually make insiders less likely to adopt & use Rule 10b5-1 plans. The implied consequence to that is diminished predictability & transparency, compared to what we have today.

This Rule 14a-8 proposal shows that shareholders have more than one way to push for changes to insider trading policies & practices. The voting outcome might also reinforce messaging to the SEC that investors support adopting the Rule 10b5-1 amendments substantially as proposed. On the other hand, more than half of Abbott’s shareholders did not support this proposal! And it’s unclear whether adding cumbersome conditions to the affirmative defense will deliver the enhanced transparency & protections that shareholders say they want.

We’ve been posting tons of memos about the SEC’s proposal – along with other resources – in our “Rule 10b5-1″ Practice Area. Members should also make sure to visit the transcript from our webcast about the proposal – Skadden’s Brian Breheny, Davis Polk’s Ning Chiu, WilmerHale’s Meredith Cross, Broadridge’s Keir Gumbs and Morrison & Foerster’s Dave Lynn were kind enough to share their many practical insights about what it will mean if adopted. Also check out this blog contributed by Orrick’s JT Ho, Carolyn Frantz and Soo Hwang about steps companies should consider before the SEC adopts a final rule.

– Liz Dunshee