As a byproduct of the government shutdown, Microsoft has decided to exclude a shareholder proposal submitted by John Chevedden on the grounds that it wasn’t submitted timely – even though the company hasn’t received no-action relief because Corp Fin isn’t processing no-action requests due to the shutdown, as noted in this Bloomberg article. Here’s a letter to Corp Fin informing it of the company’s decision to exclude.
Companies have always had the option to exclude shareholder proposals without receiving the “informal” no-action relief that the Rule 14a-8 process provides. But for the most part, companies have sought the comfort of a no-action response. Note that Microsoft had already sent in a no-action request – but the Corp Fin Staff didn’t finish processing it before the shutdown.
Given SEC Chairman Paul Atkins’ recent speech indicating that he doesn’t believe precatory shareholder proposals should be on the ballot if a company obtains a legal opinion that the proposal is “not a proper subject” under state law, I imagine some practitioners may be tempted to go this route if they felt they had a strong argument that exclusion would be granted if Corp Fin was open for business. A procedural grounds exclusion certainly would feel more secure than one based on one of Rule 14a-8’s substantive bases.
Note that Chevedden has had a few proposals over the years excluded under a court-mandated process that a company utilized rather than going the traditional Corp Fin no-action request route…
Authored by
Broc Romanek