On December 13, the SEC declined to permit Disney to exclude a proxy access shareholder proposal submitted by Legal and General Assurance (Pensions Management), in conjunction with its client, Hermes Equity Ownership.

The proposal requested that Disney’s board adopt a bylaw that would allow a holder of 3% of its stock for at least three years to nominate up to 20% of the directors. The ownership requirements of the proposal closely resembled those of the SEC’s vacated proxy access rule and was substantially similar to two other proposals that were approved by a majority of shareholders at Chesapeake Energy and Nabors Corp. at their 2012 annual meetings.

Disney sought to exclude the proposal as vague and indefinite under Rule 14a-8(i)(3), arguing that the proposal’s requirement that the nominating party provide Disney with information required by SEC “rules” about the nominating party and the board nominee was vague and misleading because it did not describe the substantive provisions of such rules. Disney also argued that the proposal was subject to multiple interpretations and its references to both SEC rules and to “any federal regulations” was vague and misleading.

In response, counsel to the shareholder proponent argued that the proposal “is a garden-variety ‘proxy access’ proposal” whose “central aspect” is the request of proxy access for owners of 3% of the stock for three years for up to 20% of the board. As such, the proponent argued that the language cited by Disney as vague and misleading was a secondary element of the proposal. The shareholder also disputed the claim that the wording was vague and subject to multiple interpretations. Disney then submitted a second letter to the SEC refuting the claims in the proponent’s response.

The SEC did not agree with Disney’s views, including its argument that the proposal’s reference to the SEC’s “rules” made it vague and indefinite and therefore subject to exclusion subject to Rule 14a-8(i)(3). In contrast, in the 2012 proxy season, the SEC had found that proxy access proposals which referenced “SEC Rule 14a-8(b) eligibility requirements,” without specifically describing such requirements, were subject to exclusion as vague and indefinite. In those letters, the SEC reasoned that the specific eligibility requirements were a central provision of the proxy access proposal in question.

A copy of the correspondence can be found here.