This feature of our blog is where our in-house readers share tips, anecdotes and thoughts about things that come up in their daily practice. We received so much feedback on the first blog and second blog about the practice of dealing with shareholder proposals that we now have this Part 3 [feel free to ping me and share your thoughts – they will be posted anonymously or with attribution, whichever you desire]:
1. “Are shareholder proposals still a thing? Back when I worked at a law firm, I recall many late evenings dealing with responses to shareholder proposals – technical deficiencies, substantive defenses, etc. But since going in-house – where I have been for almost a decade across three different companies – I can’t recall a single conversation about them, let alone receiving one. Perhaps I am just lucky?” – Lucky Lou Diamond Doe
2. “In addition to working with/reminding colleagues to check the mail – make sure that if someone opens the mail for you, that they know to retain the envelope/packaging – which could be helpful in the event of technical challenges through the SEC’s no-action letter process.” – Mercedes Doe
3. “I’ve been meeting with proponents for many years now. Some are absolute joys to work with and they’ve brought some needed excitement to what otherwise is a pretty drab event. Others are a bit more of a challenge.” – Velma Doe
4. “Pay attention throughout the prior proxy season to what proposals your peers are receiving. Even if it was not your year to receive a certain type of proposal, you may get one the following year. It is great if you can work internally to have a POV on certain types of proposals in case you do indeed receive one.” – Richie Doe
5. “- The corporate secretary should be prepared to coordinate with legal, investor relations and the board in responding to a proposal.
– If an investor has made known its concern about a particular issue (e.g., an ESG issue, a diversity issue etc.), engagement with the investor may preempt the need for a formal proposal
– Ongoing engagement with an investor after the vote on a proposal that does not pass is critical to heading off a further proposal the following year.
– If the decision is made to seek an SEC no-action letter on a proposal, early and frequent engagement with the board is critical.
– Robust disclosure regarding ESG matters in publicly filed documents (e.g. the proxy statement, 10-K) can help stave off the desire for an investor to make a proposal.” – Eric Grimshaw
6. “Shareholder proposals? Is this a trick question?” – “Grumpy” Gregory O’Malley Doe
7. “I’ve been saying this for years and years – it is critical for both parties to establish expectations upfront. Shareholders should have a preconceived notion of what it would take for them to withdraw — or not submit a proposal to the company in the first place. Companies should analyze what it will take for them to implement the proposal – or not fight its inclusion – in the early days. Even for the dialogue over the proposal itself, set reasonable expectations. And within a company, communicate what those reasonable expectations are so that management and/or directors aren’t expecting something that isn’t likely to happen.” – Broc Romanek