SEC to propose amendment to Rule 14a-8 in light of AFSCME decision

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Bill Sjostrom, SEC to propose amendment to Rule 14a-8 in light of AFSCME decision, Truth on the Market (September 07, 2006),

As discussed by Prof. B. in this post, the 2nd Circuit recently ruled “that a shareholder proposal that seeks to amend the corporate bylaws to establish a procedure by which shareholder-nominated candidates may be included on the corporate ballot does not relate to an election within the meaning of [Rule 14a-8(i)(8)] and therefore cannot be excluded from corporate proxy materials under that regulation” (see 2006 WL 2557941). Today the SEC announced (see here) that it will formulate and recommend an amendment to Rule 14a-8 addressing issues raised by the decision. According to the SEC press release:

“Rule 14a-8, the shareholder proposal rule, provides shareholders important rights in the proxy process,” said Chairman Christopher Cox in announcing the calendaring of the proposed amendment. “These rights are best secured under consistent national application of Rule 14a-8 to shareholder proposals. Therefore, to provide certainty with regard to shareholder proposals in every judicial circuit, I have directed the staff to prepare recommendations for revisions to Rule 14a-8 that will assure its consistent nationwide application. Following the publication of a proposed amendment and the opportunity for public comment, a final proposal will be considered at an open meeting of the Commission that will be scheduled to allow a final rule to go into effect in time for the 2007 proxy season.”