Most readers of this blog are familiar with the usual process to seek to keep a Rule 14a-8 shareholder proposal out of a company’s proxy statement. Write a letter to the Corp Fin Staff arguing that the proposal does not comply with Rule 14a-8’s requirements and hope the Staff agrees that they will not seek enforcement action if the company leaves the proposal out.

ExxonMobil recently took the less common path to exclude a shareholder proposal, as reflected in this complaint filed in the US District Court for the Northern District of Texas. The company argues in the complaint that the proposal is excludable on ordinary business and resubmission grounds, but also observes that the SEC Staff positions on the interpretation of these rules shift over time. The complaint also includes an argument that the proponents have abused the shareholder proposal process, and their underlying interests are contrary to those of the company and its shareholders.

Given the cost of taking a shareholder proposal dispute to court rather than handling it through the usual no action request process, this is unlikely to be the start of a trend. But it will be interesting to see how this plays out, and whether it has any effect on the SEC Staff’s approach to the arguments involved in this case.

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Photo of Allison Handy Allison Handy

Allison Handy is the firmwide co-chair of the Corporate & Securities practice. Her extensive experience includes advising public and private companies in connection with corporate governance practices, disclosure issues, and capital markets transactions, such as equity offerings, debt offerings and tender offers. She…

Allison Handy is the firmwide co-chair of the Corporate & Securities practice. Her extensive experience includes advising public and private companies in connection with corporate governance practices, disclosure issues, and capital markets transactions, such as equity offerings, debt offerings and tender offers. She is also a leader of the firm’s Environmental, Social, and Governance advisory team.

Allison provides counsel to companies on a broad range of issues faced by management and directors in connection with the many compliance aspects of securities laws, including governance rules adopted by the Securities and Exchange Commission (SEC) and stock exchanges. She advises boards and committees in matters related to internal investigations and the efforts of shareholder activists, and works closely with in-house counsel, financial personnel, and outside auditors and advisors to help her clients prepare proxy statements and other reports to investors that meet complex disclosure obligations.