The board should be ready to address shareholder concerns about political spending in advance of the company's annual meeting.
Directors can benefit from working closely with the company's general counsel and corporate secretary on the calendar of disclosures associated with the company's annual meetings. The annual proxy statement, filed in advance of the annual shareholder meeting (which is typically but not always scheduled in the spring, depending on the company's financial year), contains sections that feature resolutions for a shareholder vote. The proxy lists management resolutions such as those recommending reelection of directors or recommending approval of executive pay (“say on pay”). The proxy also lists any shareholder resolutions that have been filed with the SEC, such as resolutions requiring greater disclosure of lobbying or political spending, unless the company has excluded these from the proxy.
Under Rule 14(a) 8, there are 13 grounds under which a company may exclude a shareholder resolution from its proxy. They are:1. Failure to appear or missed a deadline.
2. Violation of law.
3. Violation of proxy rules.
4. Personal grievance or special interest.
5. Lack of relevance.
6. Absence of power or authority.
7. Pertaining to a management function.
8. Pertaining to director elections (although proxy access proposals are now permitted).
9. Conflicts with a company proposal.
10. Is already substantially implemented.
11. Duplicates a proposal by another shareholder for the same meeting.
12. Is a nonqualified resubmission.
13. Requests a specific dividend.
If a company believes that a shareholder resolution violates one or more of these bans, it can ask the Securities and Exchange Commission to give assurance that it would not take legal action against the company for excluding it. Such assurance is called a “no action” response.
For the 250 largest U.S. public companies over the past 15 years, there have been 660 resolutions concerning lobbying and/or political spending. Of these, 11 (or about 2%) obtained at least a majority vote. This number is small but growing. More than half of the majority votes (6) occurred in 2021. In one case, a company's shareholders brought lobbying and/or political disclosure to a vote 18 times before winning in 2021.
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