The Securities and Exchange Commission’s Division of Corporation Finance has issued a new Compliance and Disclosure Interpretations pertaining to shareholder proposals.

Specifically, the guidance, released on Tuesday, addresses the Exchange Act’s Rule 14a-8 and Rule 14a-4(a)(3) requiring that the proxy “identify clearly and impartially each separate matter intended to be acted upon.”  The question: How specifically must a registrant describe a Rule 14a-8 shareholder proposal on its proxy card?

The CD&I lays out the Commission’s expectation that “the proxy card should clearly identify and describe the specific action on which shareholders will be asked to vote.”

“This same principle applies to both management and shareholder proposals,” it says. For example, it would not be appropriate to describe a management proposal to amend a company’s articles of incorporation to increase the number of authorized shares of common stock as “a proposal to amend our articles of incorporation.”  Similarly, it would not be appropriate to describe a shareholder proposal to amend a company’s bylaws to allow shareholders holding 10 percent of the company’s common stock to call a special meeting as “a shareholder proposal on special meetings.” 

The following descriptions of shareholder proposals also would not satisfy Rule 14a-4(a)(3): a shareholder proposal on executive compensation; a shareholder proposal on the environment; and a shareholder proposal, if properly presented.

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