by Susan Azyndar
Editor’s Note: Many thanks to Susan Azyndar for this excellent guest post. Susan is currently a reference librarian at Ohio State University’s Moritz College of Law and co-author of the 2015 article A New Era: Integrating Today’s “Next Gen” Research Tools Ravel and Casetext in the Law School Classroom, published in the Rutgers Computer & Technology Law Journal.
I teach a one-credit business and tax legal research class; it has no prerequisites aside from our first-year legal writing courses. Some of my students sign up because they are interested in business law, some are interested in tax law, and some are just interested in learning about research. I aim to consistently engage all students on all of our topics despite their varied interests. This year, I found a useful business research topic: shareholder proposals.
Some of the key areas of shareholder activism raise issues that many students find important and compelling, e.g., environmental sustainability, diversity, political contributions, lobbying, and nondiscrimination policies. These sorts of social policy proposals are fairly common. For example, in the 2016 proxy season, 45% of shareholder proposals addressed social issues.
Finding Shareholder Proposals
Because of the constraints of my course, I designed the assignment to focus on finding shareholder proposals rather than on navigating the complex legal framework underlying the proposals, at least in any depth. Locating standard or exemplar language, whether for contracts or business filings, is a skill I emphasize along with the related steps of tweaking language to suit a client’s needs and making sure a given clause complies with applicable law.
My students, in the simulated role of working for in-house counsel at a major corporation, were tasked with finding shareholder proposals about environmental sustainability. We explored a few ways of locating this language:
- Shareholder proposals are included in proxy statements, so they are searchable on EDGAR as well as through the more user-friendly EDGAR content on the major legal databases.
- Corporations wanting to exclude shareholder proposals from their proxy statements request can file a request for a “no-action letter” with the SEC. No-action letters which often include the text of the proposal. If the SEC agrees to take no action (to not recommend enforcement), the corporation may exclude the proposal. No-action letters are available on the SEC website as well as through all three major legal databases.
- Current awareness tools such as BNA’s Corporate Governance Report discuss related trends, provide context, and often mention specific companies involved (a good starting point for finding specific language).
More Complex Research Examples
The legal framework regulating shareholder actions presents many opportunities for more complex research assignments. Here are a few examples:
- Corporations may exclude proposals that conflict with state laws. Can a corporation exclude a shareholder proposal regarding a nondiscrimination policy in North Carolina given that state’s recently enacted bathroom policy?
- The Dodd-Frank Act authorized the SEC to adopt new rules permitting shareholders greater access to the corporate proxy statement to nominate directors. Ask students to research whether the SEC has acted on this statutory authority. The SEC did promulgate a new proxy access rule, but the D.C. Circuit vacated it, noting a number of procedural flaws. See Business Roundtable v. S.E.C., 647 F.3d 1144 (D.C. Cir. 2011). This research reinforces student understanding of administrative review, a skill that applies in many contexts outside of securities. Students may also consider how a lawyer might advise clients in light of this regulatory history.
If you’d like to delve more deeply into the world of shareholder proposals, I recommend reading Shareholder Democracy: a Primer on Shareholder Activism and Participation by Lisa M. Fairfax. This relatively short and quick read will help you take advantage of students’ curiosity regarding social issues even if they are not deeply invested in learning about corporations and securities regulations.