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U.S. Securities and Exchange Commission

Speech by SEC Staff:
Staff Opening Statement
Shareholder Proposals


Lillian C. Brown

Senior Special Counsel, Division of Corporation Finance
U.S. Securities and Exchange Commission

Washington, D.C.
July 25, 2007

Good afternoon. Today we are recommending that the Commission publish two releases related to Exchange Act Rule 14a-8 - the shareholder proposal rule.

The first release would propose amendments to Rule 14a-8 that would enable shareholders to include shareholder nomination bylaw proposals in the company proxy materials if:

  • the proposal relates to a change in the company's bylaws that would be binding on the company if approved;
  • the proposal is submitted by a shareholder (or group of shareholders) that has continuously held more than 5% of the company's securities for at least one year; and
  • the shareholder (or group of shareholders) is eligible to, and has, filed a Schedule 13G that contains all required information.

There would be no limitations in our rules as to the content of those proposals. They would need only to comply with applicable state law and governing corporate documents. However, critical to allowing this access to the company's proxy materials would be comprehensive disclosure regarding the shareholder proponent and the shareholder proponent's relationship and prior interactions with the company. As proposed, Regulation 14A and Schedule 13G would be amended to provide shareholders with additional information about the proponents of shareholder nomination bylaw proposals. These additional disclosures would be required by the shareholder proponents as well as by the company. The proposals also would assure that the existing disclosure requirements for solicitations in opposition would apply to nominating shareholders and their nominees under any such shareholder nomination procedure, with the nominating shareholder being liable for any false or misleading statements in that disclosure. Nominating shareholders and their nominees, as well as the company, would be subject to the additional Regulation 14A and Schedule 13G disclosures as well.

We also recommend that this release propose revisions to the proxy rules to promote greater online interaction among shareholders by removing obstacles in the current rules to the use of electronic shareholder forums and clarify the application of the liability provisions of the federal securities laws to statements or information on such a forum. The release also asks for public comment on a range of questions related to the shareholder proposals process under Rule 14a-8.

Finally, we recommend that the Commission approve a second release, in which it would propose amendments to the text of Rule 14a-8(i)(8) regarding proposals that relate to an election. These amendments are designed to clarify the operation of the exclusion in Rule 14a-8(i)(8) in a manner that is consistent with the agency's prior interpretation of that exclusion. Under that interpretation, companies may permit the exclusion of proposals that would result in an immediate election contest or would set up a process for shareholders to conduct an election contest in the future by requiring the company to include shareholders' director nominees in the company's proxy materials for subsequent meetings.

Thank you. We would be happy to answer any questions that you have about the two releases before you.


Modified: 07/30/2007