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Recent decisions and procedural changes by the U.S. Securities and Exchange Commission (“SEC”) staff, taken together, threaten to make the shareholder proposal review process much less transparent and reliable, and thus much more susceptible to both the appearance and reality of institutional bias.

As a default rule, with certain express and limited exceptions, shareholders – that is to say, owners – who own a certain minimum threshold of equity in a company are permitted to submit proposals that will be included in the materials for that company’s annual shareholder meeting and voted on by the company’s shareholders.  The Free Enterprise Project (“FEP”) of the National Center for Public Policy Research submits a significant number of proposals every year in its ongoing campaign to counter the efforts of a large coalition of liberal groups who are systematically working to render American corporations yet another servant to the overarching progressive worldview.

If a corporation wishes to exclude a shareholder’s proposal from its shareholder-meeting materials, it petitions the SEC by letter for a decision by the SEC that it will take no legal action against the corporation if it excludes the proposal.  The SEC staff plays the central – and in the vast majority of cases, the only – role in reviewing these corporate requests.  Within the last few months, deep concerns about this process have arisen.

The substance of some of the staff’s decisions support an inference that real bias is at work.  Most relevantly, while the SEC staff recently required a corporation to submit to its shareholders a proposal to require the board to study the risks that arise from a failure to ban discrimination against gays,[1] the staff shortly thereafter allowed Apple to exclude an FEP proposal that would have required Apple’s board to study the risks that arise from a failure to ban discrimination on the basis of political affiliation or viewpoint – which, these days and especially in Silicon Valley, means discrimination against conservatives.[2]  The FEP proposal was explicitly a copy of the earlier proposal that the staff had permitted; the only thing that was changed was the group against whom the effects of discrimination were to be studied.[3]  Yet the staff allowed Apple to exclude FEP’s proposal.  The minimal justification the staff provided (relying on the opacity of its new procedures) demonstrated that it rested this apparent bias on its new interpretive methods.

As this development illustrates, the SEC staff’s innovations create the space for biased decision-making, while its first full use of these innovations strongly suggests that they have immediately been used to enact and then cover for bias.  All of this drains credibility away from the SEC’s shareholder-proposal review process and from the SEC itself.  This is bad news for corporations, for shareholders, for stock markets, for the economy, and for the integrity of the SEC.  Quick correction is required.

 

History

Shareholders were granted the right to submit proposals to the vote of their fellow shareholders by the Securities Exchange Act of 1934[4] as formally interpreted in the Code of Federal Regulation at what is commonly referred to as Rule 14a-8 (“the Rule”).[5]  The Rule also delineates the methods by which, and circumstances under which, corporations may petition the SEC’s staff to permit them to withhold those proposals.

The limited and specific nature of the grounds for exclusion was first established in the introduction to the Rule itself.  “Under a few specific circumstances, the company is permitted to exclude [shareholder] proposal[s], but only after submitting its reasons to the Commission.”[6]

The Rule then spells out 13 unique grounds on which a petition to withhold a proposal can be successfully maintained.[7]  Reasons for exclusion include redundancy with other proposals submitted that year; interference by the proposal with the ordinary business affairs of the corporation, and other unique grounds.  The staff has provided additional guidance, which while not carrying the authority of duly-enacted legislation has nevertheless had a significant influence on the process.[8]

Despite occasional expansions of the guidance the SEC has provided to shareholders submitting proposals and to corporations attempting to withhold them,[9] the system has remained essentially stable for quite a while.  When a corporation sought to withhold a proposal, it sent a letter asking the SEC staff to issue a letter confirming that it would take “no action” against the corporation for its exclusion of the proposal.  In this letter, the corporation cited the unique Rule provisions on which it sought the decision, and explained why it thought each provision applied.  It provided evidence in support of its arguments that went to the specific Rule provision in question.  The shareholder who had submitted the proposal was then permitted to send a response letter, attempting to refute the company’s position ground by ground.  After that, the SEC staff issued a decision letter, siding either with the corporation or the proponent, and briefly explaining why.  Finally, the losing side enjoyed the opportunity to petition the SEC commissioners themselves to reconsider the staff decision, if particularly pressing or generally applicable concerns about the decision arose.

 

Recent Developments

Recently, the process has begun to change.  The SEC staff has announced that it will no longer issue written decisions in all instances, reserving those for cases in which, in its opinion, the decision will have broad applicability.[10]  Additionally, it has changed its treatment of the “ordinary-business exception” ground for excluding shareholder proposals.

The ordinary-business exception appears in the Rule at 14a-8(i)(7). In its entirety, it permits exclusion of a proposal “[i]f the proposal deals with a matter relating to the company’s ordinary business operations.”[11]

The initial Rule does not flesh out this provision at all.  It has, though, been amended. One of those amendments, made in 1998, was restated and explained in a Staff Bulletin in 2002.  There the staff explained that

[t]he fact that a proposal relates to ordinary business matters does not conclusively establish that a company may exclude the proposal from its proxy materials. …[P]roposals that relate to ordinary business matters but that focus on ‘sufficiently significant social policy issues . . . would not be considered to be excludable because the proposals would transcend the day-to-day business matters.’[12]

As the amendment itself explained, in detail particularly relevant to our considerations here,

The policy underlying the ordinary business exclusion rests on two central considerations. The first relates to the subject matter of the proposal. Certain tasks are so fundamental to management’s ability to run a company on a day-to-day basis that they could not, as a practical matter, be subject to direct shareholder oversight. Examples include the management of the workforce, such as the hiring, promotion, and termination of employees, decisions on production quality and quantity, and the retention of suppliers. However, proposals relating to such matters but focusing on sufficiently significant social policy issues (e.g., significant discrimination matters) generally would not be considered to be excludable, because the proposals would transcend the day-to-day business matters and raise policy issues so significant that it would be appropriate for a shareholder vote.[13]

There matters stood until 2017.  In a bulletin issued that November, the staff recognized that corporate boards would likely have some insight into whether issues raised in shareholder proposals were of sufficiently substantial importance to transcend the category of ordinary business operations.[14]  It therefore invited corporations, in arguing for an ordinary-business exception, to include in support of their claims details of their boards’ analyses of the shareholder proposals and the underlying policy significance of those proposals.[15]

The staff expanded this guidance further in October of 2018.[16]  It suggested that a company should be expansive in its communications with the staff in order to demonstrate its board’s analysis of the substantiality of an issue.  In particular, the staff would welcome details about:

  • The extent to which the proposal relates to the company’s core business activities.
  • Quantitative data, including financial statement impact, related to the matter that illustrate whether or not a matter is significant to the company.
  • Whether the company has already addressed the issue in some manner, including the differences – or the delta – between the proposal’s specific request and the actions the company has already taken, and an analysis of whether the delta presents a significant policy issue for the company.
  • The extent of shareholder engagement on the issue and the level of shareholder interest expressed through that engagement.
  • Whether anyone other than the proponent has requested the type of action or information sought by the proposal.
  • Whether the company’s shareholders have previously voted on the matter and the board’s views as to the related voting results.[17]

The staff expressly noted that in seeking this information as part of its review, it was turning its analysis into a very fine-grained, multi-factor test that would likely result in very different results at different companies despite the proposals being very similar in form or content. “[A] proposal that the staff agrees is excludable for one company may not be excludable for another; conversely, a proposal that is not excludable by one company would not be dispositive as to whether it is excludable by another.”[18]

Another burst of staff guidance appeared this past fall.[19]  In that bulletin, the staff relevantly underscored the value of “delta analysis,” which is to say the difference between what the shareholder has proposed and what the company currently does; and of “prior voting results,” or a discussion of the results of previous related shareholder votes.  With regard to the latter, the staff explained that “the board’s analysis may be more helpful if it includes, for example, a robust discussion that explains how the company’s subsequent actions, intervening events or other objective indicia of shareholder engagement on the issue bear on the significance of the underlying issue to the company.”[20]

 

Analysis:  Opacity and the Opportunity for and Potential Appearance of Bias

In short, then, two major changes have occurred.  The first is that the staff has abandoned providing any written explanations (the administrative-law equivalent of court opinions) in most of its cases.  The second is that the staff has allowed a company to include essentially any information it cares to in asserting that an issue that would otherwise be so substantial as to transcend the ordinary-business exception is nevertheless not substantial as it affects that particular company because of the ways in which that unique company has already dealt with the issue.

Neither of these changes need necessarily have raised any concern.  With regard to the first change:  not all decisions do require written explanations, as courts have long recognized.  Rote decisions that cannot possibly have any precedential value need not necessarily be written (though it is unclear that refusing to write what have historically been very short letter decisions really saves all that much staff time).

Written – and detailed – decisions are vital, however, when a decision-maker undertakes very fact- and entity-specific determinations that can vary significantly from case to case depending upon the details of each case.  When such very case-specific decisions are made, but no explanations are provided, parties are left with no idea at all what factors were decisive and which were less or not relevant, and how all of the various factors fit together.  This leaves parties with no information about how to proceed in future cases.  And while it might seem as though this confusion could lead to fewer filings in the future, the odds are that it will increase filings as shareholder proponents – left without meaningful guidance – try, in essence, everything.  This will increase staff workloads.  At the same time, it will increase party frustration, as shareholder proponents find it impossible to know how to craft their efforts to increase their chances of success.  It will also lead to suspicions of bias if the SEC staff seems regularly to reject some shareholder proposal efforts while waving through technically similar proposals by parties with different ideological dispositions.  If the results in similar circumstances are consistently different, while no meaningful explanations are forthcoming, concerns about bias will be not only understandable, but fully warranted.

Meanwhile, the staff’s revisions to the way it analyzes the ordinary-business exception have introduced exactly the sort of case-specific, multi-factor analysis that renders detailed written explanations so vital.  As the review above illustrates, the staff has explicitly invited wide-ranging discussion by companies of their boards’ analyses, and has essentially invited them to include any information that they consider relevant – the very epitome of a multi-factored (or even “all-the-factors”) test.[21]  It has further explicitly declared that this multi-factored analysis will result in conclusions that will differ, potentially significantly, by case.[22]  These are just the circumstances in which the credibility of a decision-maker requires that it provide detailed, written explanations and analyses of the bases for its decisions.

The problem is compounded here because some of the factors that the staff has explicitly agreed to consider in determining the case-specific substantiality of proposals under the ordinary-business exception are factors that more truly go – and heretofore have gone – to the analysis of some of the 12 grounds under the Rule other than the ordinary-business exception.  For instance, “[t]he extent to which the proposal relates to the company’s core business activities”[23] is already addressed by another of the Rule’s provisions.  Notably, though, that ground has specific triggers, permitting withholding of the proposal only if it relates to operations that account for less than 5 percent of the company’s total assets at the end of its most recent fiscal year, and for less than 5 percent of its net earnings and gross sales for its most recent fiscal year, and is not otherwise significantly related to the company’s business.[24]

Similarly, “[w]hether the company has already addressed the issue in some manner, including the differences – or the delta – between the proposal’s specific request and the actions the company has already taken”[25] is already addressed, but again more specifically, in a different ground that “[t]he company has “already substantially implemented the proposal.”[26]  Note that this is a much sterner standard than what the staff is now considering relevant under the ordinary-business exception, namely that the company has addressed somewhat related issues to some degree.  Likewise, “[t]he extent of shareholder engagement on the issue and the level of shareholder interest expressed through that engagement”[27] goes directly to this ground:  “The proposal deals with substantially the same subject matter as another proposal or proposals that previously has or have been included in the company’s proxy materials within a specified time frame and did not receive a specified percentage of the vote.”[28]  But once again, the stand-alone ground’s standard is much more structured, and much harder to reach, than the newly articulated, purportedly ordinary-business-related standard.

All of this means that the staff has effectively turned the ordinary-business exception into a mélange ground under which companies can make arguments that really go to, but would be insufficient to justify exclusion under, other grounds.  It then weighs that otherwise-insufficient evidence to determine whether it feels that a company can exclude a proposal, and issues a yes-or-no decision, without any meaningful explanation of its thinking at all.

This leaves tremendous room for confusion, for the perception of bias, and for actual bias.  Because now, facts that on their own would be insufficient to trigger any other ground to permit exclusion can be amalgamated together to somehow result in exclusion under the ordinary-business exception – and the staff will, at its sole determination, refuse to explain just how that alchemy occurred.  This will leave room for the inference that the staff is merely excluding proposals with which it disagrees on the basis of substantive policy, even though such subject-matter considerations are, by regulation, supposed to play no part in its analysis.[29] Where the information submitted by a company appears not to have any particular relevance to the questions rightly at issue under the ordinary-business exception – i.e., the importance of the issue and the interference of the details of the proposal with the fundamental operations of the business – this inference will be warranted.  Where the information submitted does nothing to distinguish the circumstances at issue from separate circumstances in which a substantially similar proposal – different only in the substantive content (i.e., the ideological import) of the proposal – was treated differently, the inference is effectively required.

As will be considered in the next section, such an instance has already arisen.

 

Actual Bias Already in Evidence?

Walden Asset Management (“Walden”) submitted a shareholder proposal to CorVel Corporation in February of 2019 that stated:

RESOLVED Shareholders request that CorVel Corporation (“CorVel”) issue a public report detailing the potential risks associated with omitting “sexual orientation” and “gender identity” from its written equal employment opportunity (EEO) policy. The report should be available within a reasonable timeframe, prepared at a reasonable expense and omitting proprietary information.[30]

The SEC staff ultimately agreed with Walden that “[i]n our view, the Proposal transcends ordinary business matters,”[31] and refused CorVel’s no action request.

Taking note of this decision, we at FEP modeled our viewpoint-diversity proposal exactly on this staff-sanctioned approach, submitting a proposal the resolution of which followed the Walden text exactly, except with regard to the locus of protection.

RESOLVED  Shareholders request that Apple Inc. (“Apple”) issue a public report detailing the potential risks associated with omitting “viewpoint” and “ideology” from its written equal employment opportunity (EEO) policy. The report should be available within a reasonable timeframe, prepared at a reasonable expense and omit proprietary information.[32]

Despite the similarity of these two proposals, the SEC staff granted Apple’s no-action request against us, on the ground that our proposal, unlike the Walden proposal, did fall within the ordinary-business exception.[33]

This is a very strange outcome.  The only distinction between the two proposals is the party meant to be protected from discrimination, which should in no way change whether the proposals are or are not within the ambit of the companies’ ordinary business.  This creates an inference, if not necessarily a presumption, that the staff’s inconsistent decisions were influenced by its bias in favor of stopping discrimination on the basis of sexual orientation, but against stopping discrimination against those with disfavored worldviews – which, at Apple certainly and in corporate America broadly these days, positively means against those to the right of center.[34]

The inference in favor of bias is bolstered by the fact that neither Apple in its request for a no-action decision nor the SEC staff in granting it even mentioned the CorVel decision, much less distinguished the two cases.  By way of justifying its support of Apple withholding our proposal, rather, it declared, in toto:

In reaching our position, we considered the board’s Nominating and Corporate Governance Committee’s analysis and conclusion that the Proposal did not present a significant policy issue for the Company.  That analysis discusses the difference – or delta – between the Proposal and the Company’s current policies and practices.  In addition, the committee’s analysis noted that a shareholder proposal submitted to the Company’s shareholders last year regarding a related issue received 1.7% of the vote.[35]

The problem with this analysis is that Apple, in its no-action request, had done nothing to demonstrate that viewpoint discrimination is not a problem at Apple, or that it has established any protections against viewpoint discrimination at all.  Instead, it reported on irrelevant activities (i.e., how it prohibits discrimination against groups and on grounds other than the one we raised), while failing even to try to suggest that these other sorts of discrimination prohibition effectively achieved viewpoint non-discrimination.  Regarding viewpoint discrimination, Apple’s only relevant statement was that “the Company’s Equal Employment Opportunity Policy … does not explicitly include ‘ideology’ or ‘viewpoint’ discrimination.”[36]  It then indicated that on one page of its extensive website, it has included the sentence “We welcome all voices and all beliefs.”[37]

The distance between a non-discrimination policy that includes a prohibition against viewpoint discrimination and a stand-alone, generalized sentence on the website is itself a very significant one.  And the distance is made greater by the very fact of Apple’s fierce fight against even studying whether it should include viewpoint discrimination in its otherwise fulsome protections.  Additionally, Apple carefully failed in any way in its no-action request letter, a public document, to suggest that its current policy plus the cited sentence already does prohibit against viewpoint discrimination, as such an admission might conceivably provide a basis on which an employee might in future stand.

Apple was eager to imply that it protected against viewpoint discrimination while being careful to say no such thing.  Neither did it suggest, as it easily could have, that it intends to rectify the oversight in its non-discrimination policy by adding viewpoint discrimination protection, to bring the actual policy in line with what it suggests to be the import of the single sentence from its website.

Likewise, Apple did not indicate that it has any plans to study the problem of potential viewpoint discrimination on its own, despite direct and public communication of a problem of viewpoint discrimination at Apple from employees to the CEO Tim Cook.[38]  Nor did it, despite this direct evidence about problems at Apple as well as increasing problems with and perceptions of viewpoint discrimination in Silicon Valley and nationally,[39] provide any contradictory evidence that viewpoint discrimination presents no real, legitimate problem at the company.

In short, Apple is not doing anything at all about a real, current viewpoint-discrimination problem, and effectively admitted as much to the SEC staff.  Nevertheless, the staff decided that this was good enough, and so used “the delta” between Apple’s (nonexistent) efforts and our proposal as a justification for excluding our resolution.

The second consideration that the staff relied on was that “a shareholder proposal submitted to [Apple] shareholders last year regarding a related issue received 1.7% of the vote.”[40]  But Apple did not include any information to the SEC staff about its board’s analysis of the comparison between the previous proposal and our 2019 proposal except the bare, unsupported assertion that the board had concluded that the prior proposal had a “substantially identical policy focus.”[41]  Meanwhile, our response letter had explained the differences between the two proposals in great detail,[42] specifying just how the focus, subject, purpose and intended result of the proposals were all entirely different.[43]  Because the Apple board’s analysis was no more than conclusory, and could have added nothing to the staff’s analysis, it should have carried no weight.[44]  But instead, the staff allowed Apple’s unexplained and unsupported assertion to weigh (apparently fairly decisively) in its decision against us.

All of this creates a serious concern that the staff is enacting its personal policy bias.  Discrimination on the basis of political viewpoint is so well-established a problem in American life that it has a name – McCarthyism – and has until recently been almost universally abjured.  Now, though, the reality and perception of viewpoint discrimination is reappearing in Apple’s industry and at Apple specifically.  Though its CEO has promised to take action, he and Apple have done nothing, as Apple’s submission to the SEC staff illustrated.  But based on Apple having done nothing at all, and its unsupported assertion that our proposal is very like another proposal that had been voted down last year, the SEC staff somehow concluded that our proposal falls within the ambit of “ordinary business,” even though an identical (except that it targeted sexual-orientation discrimination instead of viewpoint discrimination) proposal a few months before did not constitute ordinary business.

If a conclusion of staff bias were to have been avoided in this instance, the staff would have needed to explain in detail how the extra information provided by Apple – that by all appearances added up to nothing at all – instead created a firm basis on which to reach, in our case, the opposite conclusion than was reached in CorVel, Inc.  Instead, the staff thwarted our attempt to get a fuller review and (at least) an explanation of the decision in a move, and in a way, that further increases the presumption of bias.

As permitted by SEC practice, we sought reconsideration of the SEC staff’s decision by the SEC commissioners themselves.  With the staff decision having been posted on the last work day before Christmas and New Year’s weeks, we submitted our request for reconsideration on January 8, 2020.[45]  Apple responded on January 15, 2020 to oppose our request for reconsideration.[46]  Its response largely recapitulated its previous arguments.[47]  (It did finally mention CorVel, Corp., but only in effect to ratify our assertion that the proposals were exactly the same except with regard to the grounds on which non-discrimination protections were sought.[48])  It also asserted, without evidence, that it had begun printing its proxy materials on January 6, 2020, and had begun mailing them out on January 9, and that it would prove expensive to have to print and send out updated mailings including our proposal.

The SEC staff went on to deny our request for rehearing on the ground that it would be unfair to ask Apple to reprint and resend its proxy materials.[49]

This is a disturbing decision for a number of reasons.  First, as noted, the SEC staff had issued its no-action response on the Friday before Christmas week.  Our reply was filed on January 8, 2020, or a week into the new work year.  There is no specific time by which requests for reconsideration must be filed, but one work week after the year-end holidays does not seem overly long.  Second, Apple provided no evidence that it had actually begun, very conveniently, printing its proxy materials on January 6, two days before our request for reconsideration was filed, while it by its own admission began mailing those materials the day after it received our reconsideration request.  Surely it is not an objective position to allow Apple to plead in opposition to our request for rehearing costs that it had admitted that it had voluntarily incurred after it had received our reconsideration request.

Finally, and most importantly, as the SEC staff admitted in its initial granting of Apple’s no-action request, “We note that the Company did not file its statement of objections to including the Proposal in its proxy materials at least 80 calendar days before the date on which it will file definitive proxy materials as required by rule 14a-8(j)(1).  Noting the circumstances of the delay, we waive the 80-day requirement.”[50]

In short, Apple had an initial 80-day filing-period requirement.  It failed to meet that requirement.  The SEC staff waived that missed deadline.  In part because of that missed deadline, the SEC’s decision only issued on the last business day before Christmas week.  We filed our request for reconsideration one week into the new business year.  There is no time limit for filing such reconsideration requests, and so we were not technically late.  Apple asserted that it had begun to print its proxy materials two days before we filed our request for reconsideration – a time shorter than the period by which it missed its initial deadline.  It then voluntarily mailed out these materials after receiving our request for consideration, creating their own expenses and potential for confusion, and then pled that cost and potential for confusion in seeking denial of reconsideration.[51]  And the SEC staff, denying us the latitude and understanding it had so generously shown to Apple, denied our request for reconsideration as untimely.

All of these circumstances, taken together, approach a textbook case of bias.  Certainly, withal, the course of events reasonably raises the presumption of bias.  And while the presumption might conceivably have been explained away, part of the process itself has been at every turn to evade any such meaningful explanations.

 

Unavoidable Conclusions & The Way Forward

The events just related do not prove that the SEC staff actively set out to create new procedures and interpretive methods that would give it opportunities for substituting its personal policy preferences for neutral decisions when evaluating shareholder proposals – though such a conclusion is not inconsistent with these events either.  What they do prove is that the new procedures and methods do create extra opportunities for such bias and for the reasonable perception of bias, while one of the first review processes fully to follow enactment of those changes showed many, many indications of bias with no evidence to undermine such a conclusion.

In other words, the innovations and their early use have created  both the unavoidable perception of bias and a strong inference that staff personal policy preferences are in fact at play in decision making.

This state of affairs cannot continue.

We at FEP continue to urge the SEC staff to review, clarify and rethink these recent developments.  It should not turn the ordinary-business exception into a multi-factor test under which facts that would fail to permit exclusion of a proposal on other grounds can nevertheless be aggregated to allow a sort of Frankenstein’s Monster of grafted-together, misfit exclusion parts.  It should particularly avoid allowing such aggregation if it is also going to refuse to explain in significant detail how and why the proffered evidence is genuinely relevant to the inquiry (as it was not in Apple’s challenge to our proposal), how it all fits together, and how shareholder proponents should in the future proceed to get their issues in front of shareholders.

To do otherwise would be to turn SEC staff no-action decisions into a black-box process that, like the one detailed here, will be open to the perception and reality of staff bias.  This will bring the reliability and objectivity of the SEC staff into question and doubt.  And that, in turn, will legitimately raise the concern that the SEC itself has ceased to function as a legitimate and objective administrator, and has become a politicized and biased broker.  If this is, or becomes, true, then surely the roles of and civil-service protections afforded to SEC staffers should be modified accordingly.

The burden has now fallen on the SEC staff to further revise its procedures to restore both the perception and reality of objectivity to its proceedings.  Failing that, it must at least not stand in the way of our next attempt to place our concerns squarely before the SEC’s commissioners for their evaluation, review, and decision.

Should the SEC staff fail to act, and should it continue to stand in the way of full SEC-commissioner review, then executive or congressional oversight operations will become necessary.  The SEC cannot be permitted to allow a reasonable inference to arise that its staff’s personal policy preferences dictate relations between shareholders and corporate boards, and thus the fate of markets, investors and employees nationwide.

 

Scott Shepard is coordinator of the National Center’s Free Enterprise Project.

 

[1] See generally CorVel Corp. (issued June 5, 2019), available at https://www.sec.gov/divisions/corpfin/cf-noaction/14a-8/2019/waldenasset060519-14a8.pdf (last accessed February 13, 2020), and infra at 7-8 and passim.

[2] See generally Apple, Inc. (issued Dec. 20, 2019), available at https://www.sec.gov/divisions/corpfin/cf-noaction/14a-8/2019/ncpprapple122019-14a8.pdf (last accessed February 13, 2020), and infra at 9 and passim.

[3] See infra at 7-8.

[4] See Securities Exchange Act of 1934, available at https://legcounsel.house.gov/Comps/Securities%20Exchange%20Act%20Of%201934.pdf(last accessed February 13, 2020) (emphasis added).

[5] See 17 C.F.R. § 240.14a-8 (shareholder proposals), available at https://www.law.cornell.edu/cfr/text/17/240.14a-8 (last accessed February 13, 2020).

[6] Id. (emphasis added).

[7] See id. at 14a-8(i)(1) through 14a-8(i)(13).

[8] See Staff Legal Bulletin No. 14 (July 13, 2001), available at https://www.sec.gov/interps/legal/cfslb14.htm (last accessed February 13, 2020).

[9] See Staff Legal Bulletins, available at https://www.sec.gov/interps/legal.shtml (last accessed February 13, 2020), for a collation of the staff guidance issued since 2001.

[10] See, e.g., Ben Maiden, Industry gets first insight into SEC’s 14a-8 no-action shift, IR Magazine (Jan. 24, 2020), available at https://www.irmagazine.com/regulation/industry-gets-first-insight-secs-14a-8-no-action-shift (last accessed February 13, 2020).

[11] 17 C.F.R. § 240.14a-8(i)(7).

[12] Staff Legal Bulletin No. 14A (July 12, 2002) (quoting Amendments to Rules on Shareholder Proposals, Exchange Act Release No. 40018 (May 21, 1998), available at https://www.sec.gov/rules/final/34-40018.htm) (last accessed February 13, 2020).

[13] Amendments to Rules on Shareholder Proposals, Exchange Act Release No. 40018 (May 21, 1998) (emphasis added).

[14] See Staff Legal Bulletin No. 14I (Nov. 17, 2017) (“A board acting in this capacity and with the knowledge of the company’s business and the implications for a particular proposal on that company’s business is well situated to analyze, determine and explain whether a particular issue is sufficiently significant because the matter transcends ordinary business and would be appropriate for a shareholder vote.”).

[15] See id. (“Accordingly, going forward, we would expect a company’s no-action request to include a discussion that reflects the board’s analysis of the particular policy issue raised and its significance. That explanation would be most helpful if it detailed the specific processes employed by the board to ensure that its conclusions are well-informed and well-reasoned.”).

[16] See Staff Legal Bulletin No. 14J (Oct. 23, 2018), available at https://www.sec.gov/corpfin/staff-legal-bulletin-14j-shareholder-proposals (last accessed February 13, 2020).

[17] Id. at B.2. (internal citation deleted).

[18] Id.

[19] See Staff Legal Bulletin No. 14K (Oct. 16, 2019).

[20] Id. at B.3.b.

[21] See Staff Legal Bulletin No. 14J, at B.2.

[22] See id.

[23] See id.

[24] Rule 14a-8(i)(5), available at https://www.sec.gov/interps/legal/cfslb14.htm (last accessed February 13, 2020).

[25] See Staff Legal Bulletin No. 14J, at B.2.

[26] Rule 14a-8(i)(10) (emphasis added).

[27] See Staff Legal Bulletin No. 14J, at B.2.

[28] Rule 14-a(8)(i)(12).

[29] See Staff Legal Bulletin No. 14 at B.6-7.

[30] CorVel Corp. (issued June 5, 2019) file at 43-45.

[31] Id. at 2.

[32] Apple, Inc. (issued Dec. 20, 2019) file at 51.

[33] See id. at 2.

[34] See infra at 9-10.

[35] Apple, Inc. (issued Dec. 20, 2019) file at 2.

[36] Id. at 16.

[37] Id. at 17.

[38] See, e.g., Troy Wolverton, Tim Cook says conservative Apple employees who feel shunned should ‘come talk to me,’ Business Insider (Mar. 1, 2019), available at https://www.businessinsider.com.au/apple-supports-employees-range-politics-tim-cook-2019-3?r=US&IR=T (last accessed February 13, 2020).

[39] See, e.g.,  Nitasha Tiku, Survey Finds Conservatives Feel Out of Place in Silicon Valley:  Online poll adds to concerns that political divisions are affecting tech workplaces, Wired (Feb. 2, 2018), available at https://www.wired.com/story/survey-finds-conservatives-feel-out-of-place-in-silicon-valley/ (last accessed February 13, 2020); Olivia Solon, ‘There was a witch-hunt’: Silicon Valley conservatives decry Google groupthink, The Guardian (Aug. 9, 2017), available at https://www.theguardian.com/technology/2017/aug/09/google-diversity-memo-conservatives-react (last accessed February 13, 2020); Mark Bergen & Ellen Huet, Google Fires Author of Divisive Memo on Gender Differences, Bloomberg (Aug. 7, 2017), available at https://www.bloomberg.com/news/articles/2017-08-08/google-fires-employee-behind-controversial-diversity-memo (last accessed February 13, 2020); Mozilla CEO Resignation Raises Free Speech Issues, USA Today (April 5 2014), available at https://www.usatoday.com/story/news/nation/2014/04/04/mozilla-ceo-resignation-free-speech/7328759/ ((last accessed February 13, 2020).

[40] Apple, Inc. (issued Dec. 20, 2019) at 2.

[41] Id. at 16.

[42] Id. at 7-9.

[43] Id.

[44] See Staff Legal Bulletin No. 14K (October 16, 2019); Staff Legal Bulletin No. 14J (October 23, 2018) (“The discussions we found most helpful focused on the board’s analysis and the specific substantive factors the board considered in arriving at its conclusion. Less helpful were those that described the board’s conclusions or process without discussing the specific factors considered.”).

[45] See Apple, Inc. (recons. denied Jan. 17, 2020) file at 7, available at https://www.sec.gov/divisions/corpfin/cf-noaction/14a-8/2020/ncpprapplerecon011720-14a8.pdf (last accessed February 13, 2020).

[46] See id. at 3.

[47] See id. at 3-6.

[48] See id. 5 (“the proposal in CorVel Corp. addressed a different social policy issue than does [our] Proposal”).

[49] See id. at 1.

[50] Apple, Inc. (issued Dec. 20, 2019) file at 2.

[51] See Apple, Inc. (reconsid. denied Jan. 17, 2020) file at 3-4.

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Author: Scott Shepard