Late last month, the SEC issued (and this month it posted) a No-Action Letter rejecting Apple’s attempt to exclude a shareholder proposal on executive compensation. The proposal was an odd one, with a quirky supporting statement, apparently submitted by a retail investors on his own.

Resolved: shareholders recommend that Apple Inc. engage multiple outside independent experts or resources from the general public to reform its executive compensation principles and practices.

However, as odd as the proposal was, it did not fit within any of the regulatory rules that would allow the company to exclude it. The SEC found that:

  • The proposal focuses on senior executive compensation, so that the company could not omit the proposal from its proxy materials in reliance on rule 14a-8(i)(7).
  • The proposal was not so inherently vague or indefinite that neither the shareholders voting on the proposal, nor the company in implementing the proposal, would be able to determine with any reasonable certainty exactly what actions or measures the proposal requires [rule 14a-8(i)(3)].
  • The company did not lack the power or authority to implement the proposal [rule 14a-8(i)(6)].

For most companies, any shareholder proposals regarding compensation either already have arrived or will not be arriving. However, this no-action letter is a worrisome development for next year.

We talked about this and other developments last Thursday in our annual eLunch webcast “Preparing for Proxy Season 2017.” A copy of the materials from that eLunch (and access to the audio archive), is available here.