Over the last two proxy seasons, governance-oriented activists, pension funds and institutional investors led a charge to afford shareholders “proxy access” — the right to include their director nominees in a company’s proxy statement. Since January 1, 2015, 300 companies have adopted a proxy access bylaw following a shareholder proposal, negotiations with a proponent or proactively. On November 10, 2016, in what appears to be the first use of a proxy access bylaw, GAMCO Investors, Inc. and its affiliated funds disclosed that they had nominated an individual for election to the board of directors of National Fuel Gas Company pursuant to the company’s recently adopted proxy access bylaw.
For the 2017 proxy season, a new front in the campaign for proxy access has opened, aimed at companies that have already adopted a proxy access bylaw. The proponents of proxy access have begun to submit so-called “fix-it” proposals seeking to amend specific features of adopted bylaws that they believe limit the ability of shareholders to use proxy access effectively. Opening the door to these “fix-it” proposals, the SEC Staff denied no-action relief to seven of the nine companies that sought exclusion on the ground that the proposal had been “substantially implemented” by the original bylaw. However, in granting relief to two companies, the Staff has provided some direction for companies seeking to exclude such proposals. In the relatively few instances to date where these proposals have gone to a shareholder vote, the results have been mixed. It is too early to draw a conclusion about how large institutional investors will react to fix-it proposals, particularly those seeking to amend bylaws that reflect the “3/3/20/20” consensus.