& Securities

As expected, so called “fix-it” proposals seeking to amend specific features of adopted proxy access bylaws have begun to zero in on a single issue – the aggregation cap. While more than 90% of companies that have adopted proxy access, including prominent institutional investors, have set the cap at 20 shareholders, this “consensus” is being challenged.

The SEC Staff has not yet addressed fix-it proposals focused exclusively on one feature of a proxy access bylaw. As discussed in our prior Alert, the Staff has generally denied requests seeking no-action relief under Rule 14a-8(i)(10) on the ground that the proposal had been “substantially implemented” where companies have sought to exclude fix-it proposals seeking changes to multiple elements of their existing proxy access bylaws.

Recently, John Chevedden has submitted single-issue fix-it proposals requesting that a company amend its proxy access bylaw to increase the aggregation cap, typically from 20 to 50 shareholders. Seven requests for relief relating to these proposals are currently pending, including one from a company that voluntarily raised its cap from 20 to 35 in support of its request for relief. The requests for relief each argue that the proposal has been substantially implemented under (i)(10), and two of the requests also argue that the proposal is “impermissibly vague” or “false or misleading” under Rule 14a-8(i)(3). The requests for relief contend, among other things, that the distribution of ownership among stockholders provides a multitude of ways in which even the smallest shareholders can reach the 3% threshold with a group of 20, and that a higher cap would not actually make it materially easier to reach that threshold.

The Staff’s decisions on the pending single-issue fix-it proposals could inform whether companies should expect other proxy access features to be targeted in the future. As these decisions become available, check Governance & Securities Watch for updates and discussion of the implications.