SEC Releases Staff Guidance on Shareholder Proposals

On October 23, 2018, the SEC released a staff legal bulletin intended to provide guidance on Rule 14a-8, which governs the exclusions by which companies may omit shareholder proposals in their proxy statements. Notably, the SEC encouraged companies relying on the “economic relevance” and “ordinary business” exclusions to continue to include discussions regarding the board’s analysis of the policy issue raised by a proposal. The guidance also provided a list of substantive factors that the SEC found to be the most helpful, which included the extent to which the proposal related to the company’s core business activities, along with quantitative data such as the impact on financial statements. The guidance also clarified the scope of the ordinary business exclusion in the context of micromanagement and executive compensation. The SEC bulletin is available here, and the Sullivan & Cromwell memorandum on the topic is available here.