On November 28, the Securities and Exchange Commission adopted an amendment to Rule 14a-8(i)(8) under the Securities Exchange Act of 1934, one of thirteen substantive bases for exclusion of shareholder proposals from proxy materials, to permit a company to omit from its proxy materials a proposal submitted by a shareholder of the company "If the proposal relates to a nomination or an election for membership on the company's board of directors or analogous governing body or a procedure for such nomination or election." The amendment codifies the SEC’s longstanding interpretation of that rule in light of the uncertainty which arose following a 2006 decision by the U.S. Court of Appeals for the Second Circuit which did not defer to the SEC’s interpretation of the rule, and was one of two conflicting access proposals published by the SEC in July. The effect of the amendment is to make clear that proposals that would result in an immediate election contest or would set up a process or procedure (in by-laws, for example) for shareholders to conduct an election contest in the future by requiring the company to include shareholders’ director nominees in the company’s proxy materials for subsequent meetings, can be excluded from company proxy materials.
The rule amendment will take effect 30 days after it is published in the Federal Register.
In commenting on the adoption of the Rule 14a-8(i)(8) amendment, SEC Chairman Cox stated his intention to “re-open this discussion in 2008” and “act on a new rule proposal next year that does more than perpetuate the status quo,” suggesting that the amendment adopted Wednesday may have a one year life-span.
The full text of the detailed release concerning the rule amendment will be posted to the SEC website as soon as possible. http://www.sec.gov/news/press/2007/2007-246.htm