Here’s the intro from this Cooley Alert from Brad Goldberg, Beth Sasfai, Reid Hooper and Michael Mencher:
“On February 11 and 12, 2025, the staff of the Division of Corporation Finance (Staff) of the Securities and Exchange Commission (SEC) provided a pre-Valentine’s Day treat for public companies and shareholders to digest in the form of two new significant sets of guidance with the potential to significantly reshape shareholder engagement and activism – including guidance on shareholder proposals submitted pursuant to Rule 14a-8 under the Securities Exchange Act of 1934 and institutional investor engagement:
- On February 11, 2025, the Staff published updated compliance and disclosure interpretation (C&DI) guidance on Regulation 13D-G beneficial ownership reporting that may have significant impacts on institutional investor engagement relating to both environmental, social and governance (ESG) and traditional corporate governance and executive compensation topics.
- On February 12, 2025, the Staff published Staff Legal Bulletin (SLB) 14M, which rescinds previous Staff guidance included in SLB 14L – published in 2021 and notably limited the ability to exclude shareholder proposals that raised issues with “broad societal impact” – and reinstates guidance previously rescinded by SLB 14L.”
Tomorrow’s blog will dig into the takeaways from the Staff’s 13D/13G guidance – whereas here’s the takeaways from the Staff’s shareholder proposal guidance from the Cooley Alert:
“What SLB 14M means for companies and next steps:
1. For those companies that have not yet submitted no-action requests, even if their deadline to submit a request has passed, consideration should be given as to whether there are valid exclusionary arguments to be made in response to the SLB 14M guidance, particularly for those proposals that relate to environmental or social concerns.
2. The refocusing of the “economic relevance” exclusion under Rule 14a-8(i)(5) on the SEC’s intent when adopting the current version of the rule means that this exclusion will now become a viable basis for exclusion on its own and no longer be tied to the availability or unavailability of the “ordinary business” exclusion under Rule 14a-8(i)(7). This is a significant change in course from the Staff related to how the economic relevance exclusion has been recently applied.
As a result, companies should review pending no-action requests, or revisit whether an argument should be made in a new request, to determine whether there is a viable exclusionary argument to be made under Rule 14a-8(i)(5) for those proposals not “otherwise significantly related to the company’s business.
3. The narrowing of the application of the social policy exception to the “ordinary business” exclusion under Rule 14a-8(i)(7) means that proposals involving issues that are of broad societal impact may nevertheless be excludable if they are not significant to the company receiving the proposal. In addition, the broadening of the “micromanagement” exclusion under Rule 14a-8(i)(7) means that climate proposals that seek to impose specific time frames or methods, for example, may once again be excludable.
As a result, proposals that are overly prescriptive or seek to impose specific time frames or methods, or that are not significantly related to a company’s business, will again likely be eligible for exclusion from proxy materials.
4. Companies should review pending no-action requests to determine if a new or supplemental argument should be made pursuant to Rules 14a-8(i)(5) and (i)(7) when seeking exclusion of shareholder proposals that relate to the guidance provided in SLB 14M.”
Authored by
Broc Romanek