Marc S. Gerber is partner and Ryan J. Adams is an associate at Skadden, Arps, Slate, Meagher & Flom LLP. This post is based on their Skadden memorandum.
As calendar year-end companies received shareholder proposals for their 2021 annual meetings, they faced a variety of uncertainties and challenges, including navigating the COVID-19 pandemic, addressing the racial inequities brought to the fore by the killings of George Floyd and others, and steering through a hyper-partisan and unprecedented U.S. presidential transition. The shareholder proposals received by companies reflected many of these broad themes.
Unlike in the prior three years, the staff of the Division of Corporation Finance (Staff) of the U.S. Securities and Exchange Commission (SEC) did not issue new guidance regarding companies’ ability to exclude shareholder proposals from their proxy statements heading into the 2021 season. Although this may have hinted at some stability in the no-action process, that was not to be the case. The Staff issued significantly fewer no-action response letters than in previous years, opting instead to respond mostly through informal decisions that were included in a chart on the SEC’s website. Because these informal responses provided the Staff’s conclusions without additional explanation, the Staff’s reasoning in a number of decisions was unclear.
Nevertheless, whether by response letter or chart entry, there were a number of notable no-action decisions and trends. As in prior years, many of these concerned the ability to exclude proposals as relating to a company’s ordinary business. In addition, some related to procedural items that might have seemed fairly straightforward. Reviewing the guideposts provided by Staff decisions from the 2021 proxy season helps in attempting to understand the Staff’s current approach to shareholder proposals.
