New SEC Staff Guidance on Shareholder Proposals: Continues to Encourage Board of Director Involvement in the “Ordinary Business” Exclusion and Provides Guidance on Useful Factors and Analyses from 2019 Proxy Season
Sullivan & Cromwell LLP - October 21, 2019
Discourages No-Action Requests Based on Overly Technical Readings of Shareholder Proof of Ownership Letter Requirements
On October 16, 2019, the SEC staff issued new guidance on the shareholder proposal process. Consistent with prior guidance, the staff continues to encourage board of director involvement in no-action letters seeking to exclude shareholder proposals under the ordinary business exclusion and discusses useful factors and analyses from the 2019 proxy season. The staff also reiterates and provides additional information on how an overly prescriptive shareholder proposal may be excluded on “micromanagement” grounds, even if it deals with proper subject matter. The new guidance also discourages no-action requests based on overly technical readings of shareholder proof of ownership letters.