On April 14, 2015, the Third Circuit Court of Appeals vacated an injunction against Wal-Mart that would have required it to include a shareholder proposal in its 2015 annual proxy statement. Wal-Mart will now be able to omit the proposal pursuant to the ordinary course of business exemption under SEC Rule 14a-8(i)(7) as originally sought.

The proposal requested that the board amend the compensation, nominating and governance committee charter to provide for oversight concerning the formulation and implementation of policies and standards that determine whether or not the company should sell a product that meets any of the following criteria:

  • especially endangers public safety and well-being
  • has the substantial potential to impair the reputation of the company
  • would reasonably be considered by many to be offensive to the family and community values integral to the company's promotion of its brand

On Jan. 30, 2014, the company submitted a request for a no-action letter regarding its intention to exclude the proposal. On March 20, 2014, the SEC stated that it would take no enforcement action if the proposal was excluded under Rule 14a-8(i)(7), as it related to Wal-Mart’s ordinary business operations. The SEC noted that proposals related to the products and services offered for sale by a company are generally excludable under Rule 14a-8(i)(7).

On April 20, 2014, the proponent filed suit in the U.S. District Court for the District of Delaware. The District Court determined that the proposal was not properly excluded from the 2014 proxy statement under the ordinary business exception of SEC Rule 14a-8(i)(7). The court found that the proposal did not impede management's ability to run the company because it only called for the board of directors to develop and implement a policy, and the board was free to delegate to management the implementation of any policy adopted. The court also noted that the proposal focused on significant social policy issues that were appropriate for a shareholder vote, including the social and community effects of sales of high capacity firearms at the world's largest retailer and the impact this could have on Wal-Mart's reputation, particularly if such a product sold at Wal-Mart is misused and people are injured or killed as a result.

On April 14, 2015, the Third Circuit vacated the District Court’s ruling, thus permitting Wal-Mart to exclude the proposal from its 2015 proxy materials based on SEC Rule 14a-8(i)(7) as originally requested.

SEC No-Action Letter dated March 20, 2014

U.S. District Court for the District of Delaware Opinion dated Nov. 26, 2014

Third Circuit Court of Appeals Ruling dated April 14, 2015