Proxy Access Proposals: Recent Developments

by Akin Gump Strauss Hauer & Feld LLP

Recently, New York City Comptroller Scott Stringer, who oversees five municipal public pension funds with $160 billion in assets, announced an initiative to give shareholders who meet specified criteria the right to nominate directors at U.S. companies.  Dubbed the “Boardroom Accountability Project,” the New York City Pension Funds are attempting to use the proxy access process to “improve the responsiveness of corporate boards to shareowners.” As an initial step, the Comptroller, on behalf of the funds, simultaneously submitted shareholder proposals to 75 companies. The Project targeted companies based on their corporate practices regarding board diversity, climate change and/or executive compensation.

The proposals, submitted pursuant to Rule 14a-8 of the Securities Exchange Act of 1934, ask each board to adopt, and present for shareholder approval, a “proxy access” bylaw.  If adopted, the bylaw would require the company to include certain information in its proxy materials with respect to a person nominated for election to the board (the “Nominee”) by a shareholder or group (the “Nominator”). The required information includes (i) the “Disclosure” (defined below) and (ii) if submitted by the Nominator, a statement not exceeding 500 words in support of the nominee (the “Statement”), provided that, in each case, the Nominator has:

  • beneficially owned 3 percent or more of the company’s outstanding common stock continuously for at least three years before submitting the nomination
  • given the company, within the time period specified in its bylaws, written notice of the information required by the bylaws and any SEC rules about (i) the Nominee, including consent to being named in the proxy materials and to serving as a director if elected, and (ii) the Nominator, including proof it owns the required shares (the “Disclosure”)
  • certified that (i) it will assume liability stemming from any legal or regulatory violation arising out of the Nominee’s communications with the company’s shareholders, including the Disclosure and Statement, (ii) it will comply with all applicable laws and regulations if it uses soliciting material other than the company’s proxy materials, and (iii) to the best of its knowledge, the required shares were acquired in the ordinary course of business and not to change or influence control at the company.

As proposed, the number of shareholder-nominated candidates appearing in the proxy materials would not exceed one quarter of the number of directors then serving, and the board would be required to adopt procedures for promptly resolving disputes over whether notice of a nomination was timely, whether the Disclosure and the Statement satisfy the company’s bylaws and applicable federal regulations, and the priority to be given multiple nominations exceeding the one-quarter limit.  

Submitted proposals that are not successfully excluded will be voted on at each company’s 2015 annual meeting and, if adopted by shareholders at that meeting, would be implemented upon shareholder approval of the related bylaw amendment at the company’s 2016 annual meeting.  While a company is not required to adopt the bylaw even if a majority votes in favor of it, proponents believe boards will react to strong support from shareholders.

Anecdotal evidence suggests the Project will not be receptive to negotiating a compromise position. While many companies will likely include the proposal in their proxy statements (in many cases with a statement of opposition), some companies may seek to exclude the proposal either for technical deficiencies or in favor of a management proposal with higher shareholder thresholds, especially since the SEC recently granted Whole Foods’ no-action request regarding the exclusion of a similar proposal.  Whole Foods successfully asserted that it could exclude a shareholder’s 3 percent/three-year proposal because it would conflict with a similar but more stringent (9 percent/five-year) management proposal.  An appeal of the Whole Foods no-action decision has been filed by the proponent of the original proposal, and, possibly in response, Whole Foods subsequently filed a preliminary proxy statement with a 5 percent/five-year management proposal — less stringent than the proposal set forth in its no-action request. Following the Whole Foods decision, a number of companies have submitted no-action requests on the grounds that shareholder proposals will conflict with the company’s own more restrictive proposal, and more issuers are likely to follow suit.

Note, however, that if shareholders approve management’s more stringent proposal, the Project or other activists may subsequently re-submit the standard 3 percent/three-year proposal. In that instance, the competing proposal exclusion strategy will not be available to the company, and the SEC has generally been unsympathetic to exclusion requests based on substantial implementation. Thus, the net result of the Whole Foods’ exclusion strategy may be to delay rather than defeat the Project’s 3 percent/three-year proposal. Companies should take this into account as they assess potential responses to the Project proposal.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Akin Gump Strauss Hauer & Feld LLP | Attorney Advertising

Written by:

Akin Gump Strauss Hauer & Feld LLP

Akin Gump Strauss Hauer & Feld LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.