This year, as a result of recent amendments to SEC rules, shareholder proponents can require companies for the first time to allow shareholders to vote on the company's proxy card for proposals to amend the bylaws to facilitate contested elections for directors. If approved, these proposals ("proxy access" proposals) would require a company in the future to permit voting on the company's proxy card for persons that shareholders nominate for election as directors, thus enabling shareholders to mount contested elections at minimal cost.

The deadline for requesting inclusion of proposals in company proxy materials for the spring meeting season approaches in November. To assist companies in considering possible responses to these proposals, this paper will discuss:  

  • The historically varying and current terms of the "election exclusion" in Rule 14a-8(i)(8)
  • The likelihood of receiving a proxy access proposal
  • Possible procedural grounds for excluding a proxy access proposal from the company's proxy statement
  • A possible state corporation law basis for excluding a proxy access proposal  

The Twists and Turns of Rule 14a-8(i)(8)

If a shareholder of a public corporation submits a proposal for shareholder action at the annual meeting, and meets certain eligibility and procedural requirements, the corporation is required to include the proposal in its proxy statement and identify the proposal in its form of proxy, unless the proposal may be excluded under one of 13 grounds enumerated in Rule 14a-8 (Rule 14a-8(i)(1)-(13)). From 1976 to 2008, one of these grounds, Rule 14a-8(i)(8), provided that a corporation may exclude a shareholder proposal "[i]f the proposal relates to an election for membership on the company's board of directors or analogous governing body."  

AFSCME v. AIG

In 2005, the AFSCME Employees Pension Plan submitted a proposal to American International Group, Inc. for action by its shareholders to amend the bylaws to require the company to include in its proxy materials and allow shareholders to vote on the company's proxy card for, persons nominated for election as directors by qualifying shareholders. AIG sought a no-action letter from the SEC permitting exclusion of the proposed bylaw amendment from the company's proxy materials on the grounds that it related to the election of directors. The SEC agreed and issued the requested no-action letter, which was consistent with the SEC's customary position on the excludability of proxy access proposals under Rule 14a-8(i)(8). In response, AFSCME brought suit in federal court seeking an order to compel AIG to include the proposal, arguing that the Rule should be interpreted to allow the exclusion only of proposals directly affecting an upcoming election, and not generally applicable procedural proposals. After the federal district court rejected the suit, AFSCME appealed. The Second Circuit held, in AFSCME v. AIG, 462 F.3d 121 (2d Cir. 2006), that the election exclusion in Rule 14a-8(i)(8) as it was then worded ("relates to an election") applied only to permit exclusion of shareholder proposals that related to a particular election of directors, and did not permit exclusion of proposals like AFSCME's that would establish a procedural rule governing elections generally.  

January 10, 2008 Amendment to 14a-8(i)(8)

In response to the AFSCME v. AIG decision, the SEC adopted an amendment to Rule 14a-8(i)(8) having the effect of overruling that decision. Under the amended Rule, effective January 10, 2008, the "election exclusion" was reworded so as to permit exclusion of a proposal "relating to" a nomination or an election of a director, "or a procedure for such nomination or election." Thus, under the amended Rule, a proposal to change the company's constituent documents to require inclusion of shareholder director nominees in the company's proxy materials would be excludable.  

New Amendment to 14a-8(i)(8) to Become Effective November 15, 2010

In 2010, as part of the SEC's adoption of rules, including new Rule 14a-11, requiring proxy access for public corporations, the SEC adopted amendments to Rule 14a-8(i)(8). Under the amended rule, stated to become effective November 15, 2010, the "election exclusion" was reworded so that only proposals meeting any of five specific criteria would be excludable. Exclusion is permitted if the proposal: would disqualify a nominee who is standing for election; would remove a director from office before his or her term expired; questions the competence, business judgment or character of one or more nominees or directors; seeks to include a specific individual in the company's proxy materials for election to the board of directors; or otherwise could affect the outcome of the upcoming election of directors. 

This amendment reversed the 2008 amendment and in effect reinstated the position adopted by the court in AFSCME v. AIG. Under the amended Rule, a company could not exclude a proposal to change the company's constituent documents to require inclusion of shareholder director nominees in the company's proxy materials.  

Stay and Release of Stay of the November 15, 2010 Amendment

The amendment did not become effective November 15, 2010. On October 4, 2010, the SEC stayed effectiveness of the amendment to Rule 14a-8(i)(8) until resolution of the petition for review of Rule 14a-11 in Business Roundtable et al. v. Securities Exchange Commission (D.C. Cir., filed Sept. 20, 2010). On July 22, 2011, the United States Court of Appeals for the District of Columbia Circuit issued an order vacating Rule 14a-11, and on September 14, 2011, the court issued its mandate concluding the litigation. The stay of the amendment to Rule 14a-8(i)(8) thus expired in accordance with its terms. Subsequently, the SEC issued a release indicating that the effective date of the amendment to Rule 14a-8(i)(8) would be September 20, 2011. On that date, the amendment became effective, narrowing the election exclusion so as to no longer permit exclusion of proxy access proposals.

Will There be Proxy Access Proposals for the 2012 Meeting Season?

Proposal Deadline

For most companies, the deadline under Rule 14a-8 for shareholders to request the inclusion of proposals in the company's proxy materials for the 2012 meeting will range from November 2011 to January 2012. The Rule requires that a shareholder proposal be submitted not less than 120 days prior to the anniversary of the mailing of proxy materials for the previous year's annual meeting. With the mailing typically occurring around 30 days prior to the meeting, for a meeting scheduled in mid-April 2012, the proposal deadline under the Rule is mid-November 2011.

There is thus sufficient time between the effectiveness of the 14a-8(i)(8) amendments on September 20, 2011 and the range of deadlines for proposals for the 2012 meeting season to permit shareholders to develop and submit proxy access proposals in a timely manner.  

Shareholder Eligibility

Many activist shareholders, such as John and Ray Chevedden and William and Kenneth Steiner, as well as a variety of union and state pension funds, have acquired ownership stakes in a large number of public corporations sufficient to satisfy the low eligibility requirements for requiring inclusion of a shareholder proposal in a company's proxy statement. These require the ownership of only $2,000 of the company's stock for a year, and also impose certain technical requirements for demonstration of the required ownership when the holder is not a holder of record (as is ordinarily the case). Companies that have previously received corporate governance proposals from such shareholders, such as proposals to allow shareholders to call special meetings or to act by written consent, may be most likely to receive "proxy access" proposals from the same shareholders, who presumably are familiar with the proposal process, including the details of demonstrating satisfaction of the share ownership requirements. If a company's financial performance has been perceived as disappointing, or if the company received a low level of approval (or outright disapproval) of executive compensation at the 2011 annual meeting, the likelihood of a proxy access proposal will be increased for 2012.  

Precatory proposals

Most proxy access proposals this season likely will be precatory. A precatory proposal does not submit for shareholder approval a proposed amendment to the company's bylaws (which would become effective upon approval), but instead requests the board to take such action as may be necessary to amend the bylaws or otherwise achieve the end of requiring shareholder nominees for director to be included in the company's proxy statement. Precatory proposals are favored by activists who want to present a proposal to numerous companies, because they lend themselves more easily to a standardized form. Proposed bylaw amendments are more likely to require careful drafting tailored to a particular company's existing bylaw provisions. Also, the drafting details for such a proposal could require sufficient verbiage so as to make it difficult for the proponent to include both the proposed amendment and a supporting statement without violating Rule 14a-8's limitation of 500 words for shareholder proposals

A board is free to exercise its business judgment to reject a precatory proposal. However, rejecting a proposal that has been approved by a majority shareholder vote may be uncomfortable for a board, and could risk adverse investor reaction.  

There can be important timing differences regarding the effect of precatory and binding proposals. A binding proxy access proposal (i.e., a bylaw amendment) approved by shareholders at the 2012 annual meeting would be immediately effective, so as to allow shareholders to include director nominees in accordance with the proxy access bylaw in the company proxy statement for the 2013 annual meeting. On the other hand, if a precatory proxy access proposal were approved at the 2012 annual meeting, the board, if it desired to adopt a bylaw amendment responsive to the proposal, may reasonably determine to condition effectiveness of any amendment on shareholder approval of the amendment at the 2013 annual meeting. If the bylaw amendment were then approved by shareholders at the 2013 annual meeting, it would be first in place to allow inclusion of shareholder nominees for director at the 2014 annual meeting. Of course, a board could defer action in response to a precatory proposal for a year or more, or even indefinitely.   

Companies will want to be aware of ISS voting guidelines that currently recommend a withhold vote or vote against all directors where the board failed to act on a shareholder proposal that received approval of a majority of the shares outstanding the previous year, or if the board failed to act on a shareholder proposal that received approval of the majority of shares cast in the last year and one of the two previous years.

What Options Are Available in Responding to Proxy Access Proposals?

Under Rule 14a-8(j), if a company intends to exclude a proposal from its proxy materials, it must file its reasons with the SEC no later than 80 days before it files its proxy statement (or a later date if the company can demonstrate "good cause"). The practice of almost all companies in making such a filing is to request a statement from the SEC that it will not recommend any enforcement action against the company if it excludes the proposal. If the SEC refuses to provide such a statement, the company will typically include the proposal.

A possible reaction to the proposal would be to include it in the proxy statement, and also craft for inclusion a statement of reasons in support of the board's recommendation that shareholders vote against the proposal, if the board determines the proposal is not in the best interest of the company. This response may be more attractive for precatory proposals, which leave the board with flexibility even if approved by shareholders. A precatory proposal is not binding, and if the board determines it wishes to adopt a provision in response to a precatory proposal that has been approved by shareholders, it will have flexibility in developing the particulars of the provision. By contrast, there may be a greater desire to exclude a proposed bylaw amendment, which if approved could limit board flexibility.1

In crafting a statement in opposition to a proxy access proposal, a company may wish to emphasize the criteria that its nominating committee applies in choosing director nominees, which would not be applicable to shareholder nominees given proxy access. Also, the company's statement could stress the idea that an effective board is made up of individuals having disparate talents and experiences, that the nominating committee is equipped to evaluate the particular talents and experience of potential nominees with a view to determining whether these dovetail with the other directors in an effective combination, and that this process of evaluation is a complex and personal one, better suited than the determination of a single shareholder to result in nominations of outstanding candidates for inclusion in the proxy statement.  

The outcome of the vote on a proxy access proposal included in the company's proxy statement will likely be significantly influenced by any voting recommendation issued by ISS on the matter. Currently, ISS guidelines state that its recommendation will be made on a case-by-case basis, taking into account particular features of the proposal and the proponent's rationale for the proposal in terms of board and director conduct for the company in question. It is possible that these guidelines could be modified as the proxy season approaches.

In the event the company determines to seek exclusion of a proxy access proposal, several grounds may be available under Rule 14a-8. Two of these grounds would require the board of directors to adopt its own provision regarding proxy access. These grounds will thus not be available if the board were to determine that proxy access in any form is not in the best interest of the company.    

Rule 14a-8(i)(10)

In response to the shareholder proposal, the board could approve a proxy access provision of its own devising, and argue that the board's provision "substantially implements" the shareholder proposal, thus permitting exclusion of the shareholder proposal under Rule 14a-8(i)(10). However, if a board were to take up the issue of proxy access immediately upon the receipt of a shareholder proposal this year, there may not be sufficient time to adequately discuss and develop a well-considered proxy access provision for board approval.  As noted above, under Rule 14a-8, the shareholder proxy access proposal could be submitted as late as 120 days prior to the anniversary date of the prior year's proxy statement. The deadline for notifying the SEC of the company's intention to exclude is 80 days before the 2012 mailing date, unless good cause is shown for a later deadline. For a company whose 2012 proxy statement is mailed around the same date as the 2011 proxy statement, the company could have only approximately 40 days to develop a proxy access provision in time to be able to describe the provision in a 14a-8(j) filing seeking exclusion of the shareholder proposal on the grounds that it had been substantially implemented. Many companies will feel this is insufficient time to fully educate the board about the issue and to finalize this important corporate governance provision.

In the development of a proxy access provision, a number of important issues would have to be considered and decided upon. These include:

  • What level of share ownership should be required for a shareholder to request inclusion of his director nominee in the proxy statement?
  • Should the shareholder be permitted to combine his shares with those of other shareholders for purposes of meeting the ownership requirement?
  • What period of share ownership should be required of the nominating  shareholder?
  • What should the limit be on the number of shareholder nominees which will be included in the proxy statement?
  • In the event the number of qualifying nominees is higher than the limit, which ones should be included?
  • What disclosures should be required by a nominating shareholder as to the shareholder and the nominee?
  • Should a nominee be required to meet "independence" or other requirements?
  • The time constraint faced in analyzing these elements and reaching a determination on them based on the company's particular circumstances could be ameliorated if a board were to take up this issue in advance of the submission of any shareholder proposal. However, most companies will consider it premature to do so.  

The ability to obtain an SEC no-action letter based upon substantial implementation may depend directly on what differences exist between the shareholder proposal and the board's variant. Significant differences between the shareholder's proposal and the company's provision relating to the elements described above, particularly the share ownership threshold and duration requirements, may make it unlikely that the SEC will issue a no-action letter allowing exclusion of the proposal on substantial implementation grounds.  

Rule 14a-8(i)(9)

Under Rule 14a-8(i)(9), a proposal may be excluded from the company's proxy statement if it directly conflicts with one of the company's own proposals to be submitted to shareholders at the same meeting. A company could avail itself of this basis for exclusion by developing a company proposal relating to proxy access, for submission to shareholders for approval at the annual meeting, and requesting no-action treatment to allow exclusion of the shareholder proposal. The timing concerns identified above in connection with the substantial implementation exclusion (as to the difficulty of developing a well-considered provision on a timely basis) would also apply in the case of the competing proposal exclusion. Here, however, substantial differences between the shareholder's proposal and the company's proposal should not render the exclusion unavailable. In the past, companies have had success obtaining no action positions based on the competing proposal exclusion where, for example, a company responded to a shareholder proposal to allow shareholders to call special meetings by proposing for shareholder approval, a variant requiring a higher-percentage ownership requirement for a special meeting call. A board would thus have considerable flexibility in developing a competing proposal having acceptable features with respect to the proxy access elements described above.

Obviously, offering a competing proposal will not be preferred by boards that have determined that proxy access in any form is not in the best interests of the company.  

State Corporation Law and Rules 14a-8(i)(1) and (2)

There may be a basis to argue for exclusion of a shareholder proxy access proposal without offering an alternative company proposal. Rule 14a-8(i)(1) permits exclusion of a proposal if the proposal is not a proper subject for action by shareholders under the laws of the jurisdiction of the company's organization. Rule 14a-8(i)(2) permits exclusion if the proposal would, if implemented, cause the company to violate state law. 

In CA, Inc. v. AFSCME, 953 A.2d 227 (Del. 2008), the Delaware Supreme Court considered the applicability of these two exclusions under Delaware law. At issue in that case was a shareholder proposal to amend a Delaware corporation's bylaws to require the board of directors to cause the corporation to reimburse a shareholder for reasonable expenses incurred in connection with the shareholder's nominating candidates for election as directors.2  These included the shareholder's proxy solicitation expenses. The company sought to exclude the proposal based upon Rules 14a-8(i)(1) and (2), asserting that the proposal was not a proper action for shareholders under Delaware law and, if implemented, would violate Delaware law, and requested from the SEC a no-action letter if the company excluded the proposal on these grounds.

The SEC availed itself of a unique provision of the Delaware Constitution, which authorizes the Delaware Supreme Court to hear and determine questions of law certified to it by the SEC. The questions certified were stated as follows:

  • Was the proposal a proper subject for action by shareholders as a matter of Delaware law?
  • Would the proposal if adopted cause the corporation to violate any Delaware law to which it is subject?  

With respect to the question of whether the proposal was a proper subject for action by shareholders as a matter of Delaware law, the court noted that § 109(b) of the Delaware General Corporation Law (DGCL) provides that the bylaws of the corporation (which the shareholders are empowered to amend under § 109(a)) may contain:  

any provision for the management of the business and for the conduct of the affairs of the corporation, and any provision creating, defining, limiting and regulating the powers of the corporation, the directors and the stockholders...; if such provisions are not contrary to the laws of this State.  

On the other hand, § 141(a) of the DGCL provides:

The business and affairs of every corporation organized under this chapter shall be managed by or under the direction of a board of directors, except as may be otherwise provided in this chapter or in its certificate of incorporation.  

The court stated that determining whether the bylaw amendment was a proper subject for shareholder action required the reconciliation of these provisions, in order to determine whether the bylaw was a permissible or an impermissible limitation imposed by shareholders upon director authority. The court held that the bylaw was not an impermissible limitation, because it regulated a process for director decision-making, which is a proper subject for shareholder action, as opposed to mandating the director decision itself, which would not be a proper subject. Although the bylaw, in the court's words, was "infelicitously couched as a substantive-sounding mandate to expend corporate funds," the court concluded that the bylaw had "both the intent and the effect of regulating the process for electing directors." As such, the court determined that the bylaw was a proper subject for shareholder action.

With respect to the second issue - whether the bylaw violated Delaware law - the court noted that it was being asked to consider this question in the abstract, that is, in the absence of application of the bylaw in the context of a specific set of facts. In that context, the court concluded that the bylaw violated a Delaware legal principle derived from the statutory vesting in the board of directors of the power to manage the business and affairs of the corporation. The bylaw, the court held, violated Delaware law by "committing the board of directors to a course of action that would preclude them from fully discharging their fiduciary duties to the corporation and its shareholders." Noting that Delaware courts have previously invalidated contractual provisions limiting directors' exercise of their fiduciary duties in the context of a business acquisition or redemption of a poison pill, the court stated that the bylaw, an internal governance contract, similarly prevented the directors from exercising fiduciary duties that might in a given case otherwise require them to deny reimbursement to a shareholder nominator.

This situation could arise, the court stated, in cases where, for example, the proxy contest was motivated by personal or petty concerns, or to promote interests that do not further, or are adverse to, those of the corporation. In those circumstances, the board's fiduciary duty could require it to deny reimbursement. A bylaw preventing the board from exercising its fiduciary duty in this way would violate Delaware law if adopted by shareholders.  

Subsequent to the CA v. AFSCME decision, the Delaware legislature enacted amendments to the DGCL (§ 113) expressly stating that a Delaware corporation's bylaws may provide for the reimbursement by the corporation of expenses incurred by a shareholder in soliciting proxies in connection with an election of directors, subject to such procedures or conditions as the bylaws may prescribe. The section includes a nonexclusive list of such procedures and conditions. 

At the same time, the Delaware legislature enacted a new § 112 to the DGCL, stating that the bylaws of a Delaware corporation may provide that the corporation is required to include in its proxy solicitation materials (including its form of proxy) one or more individuals nominated by a shareholder, to the extent and subject to such procedures or conditions as may be provided in the bylaws. The section includes a nonexclusive list of such procedures and conditions.

What is the impact of CA v. AFSCME and the Delaware Amendments on Proxy Access Proposals Today?

In any situation where a company requests that the SEC express a no-action position for exclusion of a proposal on the basis that it is not a proper subject for action by shareholders under state law (14a-8(i)(1)), or on the basis that the proposal if implemented would violate state law (14a-8(i)(2)), the company is required to submit an opinion of counsel in support of its position (14a-8(j)(2)(iii)).  

Opinion Unlikely Under 14a-8(i)(1)

In the case of a Delaware corporation, new § 112 of the DGCL, by expressly authorizing proxy access bylaws, would appear to preclude an argument under Rule 14a-8(i)(1) that a shareholder proxy access proposal is not a proper subject for action by shareholders under Delaware law. It would thus be unlikely that counsel would be in a position to provide an opinion to such effect.  

For non-Delaware corporations whose governing statute does not contain an express authorization of proxy access bylaws, the applicable corporation law is likely to contain provisions similar to DGCL § 109 (providing broad authorization for the bylaws to contain provisions relating to the business and operations of the company) and § 141 (vesting in the directors, the authority to manage the business and operations of the company). As a result, the discussion of the court in CA v. AFSCME in assessing what limitations these types of provisions impose on the ability of shareholders to adopt bylaws limiting director authority, would likely be given significant weight by counsel requested to opine under the corporation's governing law, particularly in the absence of applicable judicial authority in the incorporation jurisdiction. Other jurisdictions often defer to the Delaware courts with respect to corporation law matters, and the CA v. AFSCME opinion bears particular prominence in arising in the proxy solicitation context from a special provision under which the questions at issue were certified directly to the Delaware Supreme Court by the SEC. 

The holding in CA v. AFSCME that a proxy expense reimbursement bylaw was a proper subject of shareholder action, based on the conclusion that the bylaw was primarily a procedural regulation of elections, would appear to apply with even greater force to proxy access bylaws requiring inclusion of a nominee in the company's proxy materials, in which the procedural element is even more predominant. These considerations could make it difficult for counsel to opine, with respect to a non-Delaware corporation, that a proxy access proposal is not a proper subject for action by shareholders, in the absence of authority in the incorporation jurisdiction supporting such an opinion.  

In addition, CA v. AFSCME directly posed the question of whether the proposal was a proper subject for shareholder action, because the proposal there was not precatory, but was a proposal for shareholder amendment of the bylaws. In the case of a precatory proposal, the only action that the shareholders are asked to take is a recommendation that the board take action on the matter. Where final action, such as an amendment of the bylaws, is in the board's hands, it becomes much more difficult to conclude that the precatory proposal is a matter that is not a proper subject for shareholder action. The Note to Rule 14a-8(i)(1) makes this point in stating that "most proposals that are cast as recommendations or requests that the board of directors take specific action are proper under state law."

Opinion Possible Under Rule 14a-8(i)(2) - The Importance of the "Fiduciary Out"

The decision in CA v. AFSCME points up the differences between the notion that a proposal is not a proper subject for action by shareholders under state law under 14a-8(i)(1), and the idea that a proposal would, if implemented, violate state law under 14a-8(i)(2). The court determined that the proxy expense reimbursement proposal at issue in that case was a proper subject for action by shareholders under Delaware law, but held that the bylaw, if enacted, could violate state law. The rationale for the holding was that the proposal contained no provision allowing the board to reject reimbursement if the board determined such action was necessary in the exercise of its fiduciary duties.

This holding, in the proxy expense reimbursement context, could provide a basis for counsel, in the case of a Delaware corporation, to opine that a proxy access proposal not containing such a "fiduciary out" provision would, if implemented, violate Delaware law. A decision by the board of whether to include a shareholder nominee in the proxy statement paid for and distributed by the company would appear to be as much within the purview of the board's fiduciary judgment as a decision as to whether to pay expenses of a competing proxy solicitation. As the court noted in CA v. AFSCME, a situation could be presented where the nomination is being made for personal or petty concerns, or by a competitor of the corporation, or in other circumstances where the nomination is not in the best interests of the corporation and its shareholders. While it is possible that a proponent could anticipate this problem by including a fiduciary out provision in the proposal, this may be unpalatable to many shareholder proponents.

In Delaware, the courts have not yet determined whether new § 113 of the DGCL constitutes a legislative negation, in the case of proxy access bylaws, of the CA v. AFSCME holding that a bylaw relating to the election process may not foreclose the exercise by the board of its fiduciary duties. In the absence of such a determination, counsel may well be in a position to opine under Delaware law that a proxy access proposal with no fiduciary out concept would, if implemented, violate Delaware state law.  

In other states, where the legislature has not expressly authorized proxy access bylaws, counsel may also be in a position to opine that a proxy access proposal with no fiduciary out would, if implemented, violate applicable state law, particularly if there is no contrary judicial authority in the incorporation jurisdiction. Such an opinion would be supported by the rationale of CA v. AFSCME. And, although CA v. AFSCME relies to a degree on prior Delaware case law voiding, in other contexts, contractual provisions binding directors to refrain from the exercise of their fiduciary duties, counsel may well conclude that in the applicable state, as in Delaware, the invalidation of such a bylaw provision is a necessary byproduct of a core statutory principle, vesting in directors the management of the business and operations of the corporation.

Such an opinion may be possible for a precatory proposal, just as with a proposed binding bylaw amendment. If the terms of the precatory proposal do not include the concept of permitting the board in a given case to deny proxy access to a nominee in the exercise of the board's fiduciary duties, counsel may be able to opine based on the rationale of CA v. AFSCME that the proposal, "if implemented," would violate state corporate law. The term "if implemented," as used in Rule 14a-8(i)(2) could reasonably be interpreted by counsel as meaning, in the case of a precatory proposal, if put into effect by the company in accordance with the terms of the precatory proposal. If the precatory proposal does not itself include the idea of a fiduciary out, counsel may be able to opine that if implemented it would violate state law.

Since proxy access proposals have only become practical upon the recent effectiveness of the amendment to the election exclusion in Rule 14a-8(i)(8), it is difficult to predict whether in a particular case the SEC will issue a no-action letter based on a claim of excludability under Rule 14a-8(i)(2) supported by a counsel opinion that the proposal, if implemented, would violate state law. The SEC's response could well depend on the particulars of the proxy access proposal, on the reasoning expressed in the counsel opinion, whether the proponent delivers a contrary counsel opinion, and the reasoning in that opinion.