A group comprised of parents whose children or spouses were victims in the Sandy Hook tragedy, together with the Law Center to Prevent Gun Violence, have filed a brief in support of Trinity Wall Street in a case where Wal-Mart is attempting to exclude a shareholder proposal. Separately, a group of law professors have also filed a brief in support of Trinity Wal-Mart. Finally, Wal-Mart filed its reply brief, concluding its briefing efforts.
The brief filed by the relatives of the Sandy Hook victims argues Wal-Mart and the various amici act as if the proposed resolution required Wal-Mart not to sell a specific product. The proponents believe it does not. Rather, it requires a specific board committee to do precisely what boards are supposed to do – oversee management in the development and implementation of policies.
The brief filed by 38 professors of corporate and securities law is persuasive, mostly restating and recovering Trinity Wall Street’s analysis. According to the professors, Trinity Wall Street’s proposal is the “perfect” illustration of the appropriate use of a shareholder precatory proposal to provide a company’s board with important information about shareholders’ financial and nonfinancial concerns, without limiting the board’s authority to exercise its business judgment or interfering with the day-to-day operations of the company. The professors make the point that Wal-Mart seeks to stretch two Rule 14a-8 exemptions to such a degree that, together, they threaten to swallow the entirety of the rule. Under Wal-Mart’s expansive view of the two exemptions, any shareholder proposal will either be too specific (and thus infringe on “ordinary business operation”) or be too general (and thus “inherently vague and indefinite”).
When Keith Higgins, Director, SEC Division of Corporation Finance, gave his February 10 speech that touched on this case, I could see the litigants seizing upon it. Wal-Mart, in its reply brief, believes Mr. Higgins is in their camp. Wal-Mart notes that “the SEC staff has had no second thoughts about its analysis of Trinity’s Proposal” and highlights Mr. Higgins’ view that “the key is to consider whether the underlying subject matter of the committee involves an ordinary business matter.” Wal-Mart also defends its gun sales policy by noting sales of the subject weapons are made in stores where there are “concentrations of hunters and sportsmen” and there is no “gap in the Company’s governance” or any “systematic failure of the board to exercise oversight.”