麻豆视频

The Staff in the Division of Corporation Finance at the U.S. Securities and Exchange Commission has issued three new sets of guidance that may influence and potentially reshape how shareholders engage with companies going forward.

Guidance on 13G Eligibility

On February 11, the Staff issued new compliance and disclosure on the eligibility of shareholders to report their ownership interests on Schedule 13G. The new guidance provides that the Staff鈥檚 assessment of a shareholder鈥檚 13G eligibility will consider the subject matter of such shareholder鈥檚 engagement with management and the context in which such engagement occurs. A shareholder 鈥渨ho discusses with management its views on a particular topic and how its views may inform its voting decisions, without more, would not be disqualified from reporting on a Schedule 13G.鈥� However, a shareholder who takes the following actions could be disqualified if they:

• recommend that the company remove its staggered board, switch to a majority voting standard in uncontested director elections, eliminate its poison pill plan, change its executive compensation practices or undertake specific actions on a social, environmental or political policy and, as a means of pressuring the issuer to adopt the recommendation, explicitly or implicitly condition their support of one or more of the issuer鈥檚 director nominees at the next director election on the issuer鈥檚 adoption of its recommendation; or
• discuss with management its voting policy on a particular topic and how the issuer fails to meet the shareholder鈥檚 expectations on such topic, and, to apply pressure on management, state or imply during any such discussions that they will not support one or more of the issuer鈥檚 director nominees at the next director election unless management makes changes to align with the shareholder鈥檚 expectations.

Potential Impact: The Staff鈥檚 recent guidance on 13G eligibility may call into question the viability of certain institutional investor stewardship practices. Institutional shareholders have from time to time leveraged their proxy voting power to influence governance practices within companies. Such efforts have been supported by publicly disclosed proxy voting policies and vote bulletins which outline circumstances where an institutional shareholder may vote against directors. In recent years, it has also become an increasingly common practice for stewardship teams to engage with management and directors prior to and following annual meetings to discuss specific matters of concern relating to corporate governance and executive compensation.

As institutional investors look to preserve their Schedule 13G eligibility, there may be changes in the tone, substance and timing of engagements with and communications from stewardship teams. Such changes could make it more difficult for companies to have candid conversations with their key investors on issues of concern. The changes may also make it more difficult for companies to pinpoint the issues that are of priority to their largest investors and are most likely to trigger an adverse vote against directors. As investor priorities and perspectives evolve, companies may also have more difficulty tracking such changes if publicly disclosed proxy voting-related guidance become less frequent or detailed.

The impact of recent guidance changes could be particularly noticeable in contested situations where the perspectives of institutional investors may become more 鈥渕uted鈥� relative to the views of activist shareholders and proxy advisors who will not be impacted by the latest 13G guidance. In those circumstances, companies could find themselves flying blind if they have not already developed robust relationships with their key investors and strategies to discern their perspectives and the meaning of any indirect messaging. Developing these kinds of robust relationships and strategies can be very useful going forward.

Revised Guidance on Rule 14a-8 Shareholder Proposals

On February 12, the Staff rescinded Staff Legal Bulletin No. 14L (鈥淪LB 14L鈥�), which broadly permitted Rule 14a-8 shareholder proposals relating to 鈥淓SG鈥� matters of no economic significance to the target company and issued (鈥淪LB 14M鈥�) in its stead. The adoption of SLB 14M and the recission of SLB 14L mark a direct reversal of policies adopted under former SEC Chair Gary Gensler.

SLB 14M revises guidance on the excludability of Rule 14a-8 shareholder proposals on the basis that a proposal lacks 鈥渆conomic relevance鈥� or is related to the 鈥渙rdinary business鈥� of a company. Previously, SLB 14L provided that shareholder proposals which lacked 鈥渆conomic relevance鈥� or were related to the 鈥渙rdinary business鈥� of a company could not be excluded if they concerned a significant social policy matter, regardless of whether such matter was significant to the target company. Going forward, under SLB 14M, the Staff will be taking a company-specific approach and shareholder proponents who raise 鈥渟ocial or ethical issues鈥� in their proposal must 鈥渢ie those matters to a significant effect on the company鈥檚 business.鈥� Board analysis on the significance of such matters to a company will also be welcomed again by the Staff to assist in the Staff鈥檚 analysis of no-action requests to exclude shareholder proposals.

In addition, new SLB 14M reinstates guidance making it easier for companies to exclude shareholder proposals that seek to 鈥渕icromanage鈥� them. That 鈥渁nti-micromanagement鈥� guidance had previously been rescinded by the Gensler Staff鈥檚 SLB 14L. The changes signal that the Staff will now be prepared to take a more expansive view on what proposals may be excluded on the basis of 鈥渕icromanagement.鈥� Amendments to Rule 14a-8 proposed in 2022 but never adopted, and which would have further narrowed the bases for companies to exclude shareholder proposals, have also been placed on hold indefinitely.

Potential Impact: The latest guidance on Rule 14a-8 will make it significantly easier for companies to exclude shareholder proposals from special interest groups with environmental or social agendas. Support for proposals focusing on environmental or social issues have already noticeably declined during the past two proxy seasons as investors weigh the costs and benefits of such proposals.

Special interest shareholder proponents may begin to look to alternative avenues to engage with companies. Over the past year, we have observed social media becoming a platform for pressuring companies on social issues. We have also observed shareholders bypassing the constraints of Rule 14a-8 and turning to Rule 14a-4 to submit multiple shareholder proposals at companies. What is unlikely to happen, however, is an increase in proxy contests relating to non-economic social or environmental issues such as those launched against Starbucks, McDonald鈥檚 and Kroger in recent years. Such campaigns are costly, and like shareholder proposals on environmental and social issues, have not gained traction with the broader shareholder base.

While the updated Staff guidance will likely narrow opportunities for shareholders to use Rule 14a-8 shareholder proposals to influence company policy, the appetite for engagement and change among shareholders focused on environmental and social issues has not diminished. Consequently, we may see such shareholders increasingly use third-party engagement platforms or undertake direct outreach to boards and management as part of efforts to influence corporate policy.

Guidance on the Use of Exempt Solicitation Notices

On January 27, the Staff issued new and revised for Notices of Exempt Solicitation. Among other changes, the CD&Is:

• require shareholders who own less than $5 million of the class of subject securities and are consequently submitting a voluntary Notice of Exempt Solicitation to clearly state such fact on the cover of such notice;
• require shareholders to disseminate written soliciting materials to security holders before filing such materials under the cover of a Notice of Exempt Solicitation with the Commission;
• reiterate that only written communications that constitute a 鈥渟olicitation鈥� under the Exchange Act[1] should be submitted under the cover of a Notice of Exempt Solicitation; and
• apply Rule 14a-9, which prohibits materially false or misleading statements, to materials filed under the cover of a Notice of Exempt Solicitation.

Potential Impact: The latest CD&Is on the use of Notices of Exempt Solicitation appear to respond to growing concerns that such notices have inadvertently become a platform for shareholders, particularly shareholder proponents who have submitted Rule 14a-8 shareholder proposals, to engage in 鈥減ublic debate鈥� with companies in the days and weeks leading up to the annual meeting. Unlike Rule 14a-8, which restricts the length of a shareholder鈥檚 supporting statement to 500 words, exempt solicitation notices do not impose word count limits. Consequently, for shareholders with limited resources, exempt solicitations have become an attractive avenue to garner the attention of not only the company but also institutional investors and proxy advisors who often review such filings prior to making their voting decisions.

The latest Staff guidance sends a clear signal that the Commission under incoming Chair Paul Atkins will adopt policy positions that are meaningfully more 鈥減ro-company鈥� than the approaches pursued under former Chair Gary Gensler. As companies respond to these shifting policies, they would be well advised to ensure that they remain closely attuned to institutional investor expectations given the significant proxy voting influence they continue to wield at many companies.

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[1] 听听听听听听 The Exchange Act defines 鈥渟olicitations鈥� to include, subject to certain exceptions: (i) any request for a proxy whether or not accompanied by or included in a form of proxy; (ii) any request to execute or not to execute, or to revoke, a proxy; or (iii) the furnishing of a form of proxy or other communication to security holders under circumstances reasonably calculated to result in the procurement, withholding or revocation of a proxy.