The Board’s Importance in Vetting Shareholder Proposals

A recent successful effort by a public company to exclude an environmental proposal from its proxy statement may signal a new approach for boards of directors to consider when managing shareholder proposals. Because retailers and consumer products companies routinely receive shareholder proposals on environmental and sustainability issues, similar arguments for exclusion may be persuasive to the staff of the Securities and Exchange Commission (SEC) in the future. Activist shareholders have made use of SEC Rule 14a-8 to force shareholder referenda on all manner of issues, with those dealing with environmental, social and governance issues among the most popular. Rule 14a-8 provides that any shareholder who has continuously held at least $2,000 in market value or 1 percent of a public company’s common stock for at least one year can submit a proposal for inclusion in a public company’s proxy statement, subject to certain exceptions and exclusions. While such…

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