Update: SEC Denies Apple’s Request to Exclude a Shareholder Proposal

As a follow up to a previous blog post regarding the U.S. SEC’s new Staff Legal Bulletin 14I which outlines guidance regarding the shareholder proposal process, the SEC recently denied Apple’s request to exclude a shareholder proposal. Recall, the new shareholder proposal guidance allows companies to include a board analysis in efforts to build a stronger argument to the SEC when a company believes a shareholder proposal should be excluded. Apple was the first company to seek exclusion of a shareholder proposal using a board analysis. The SEC Division of Corporation Finance took into consideration Apple’s board discussion, but ultimately decided Apple’s response that the proposal should be excluded based on a significant policy issue that transcends the Company’s ordinary business was not enough, and therefore allowed the proposal to be included in Apple’s 2018 proxy statement for inclusion. The shareholder proposal submitted to Apple dealt with whether Apple’s operations in China sufficiently promote human rights by offering products designed to “help internet users evade censorship” by the Chinese government.

The SEC noted the following in its decision to Apple:

We are unable to concur in your view that the Company may exclude the Proposal under rule 14a-8(i)(7). We are unable to conclude, based on the information presented in your correspondence, including the discussion of the board’s analysis on this matter, that this particular proposal is not sufficiently significant to the Company’s business operations such that exclusion would be appropriate. As your letter states, “the Board and management firmly believe that human rights are an integral component of the Company’s business operations.” Further, the board’s analysis does not explain why this particular proposal would not raise a significant issue for the Company. Accordingly, we do not believe that the Company may omit the Proposal from its proxy materials in reliance on rule 14a-8(i)(7).

However, regarding another shareholder proposal submitted to Apple asking the company to “prepare a report that evaluates the potential for the Company to achieve, by a fixed date, “net-zero” emissions of greenhouse gases relative to operations directly owned by the Company and major suppliers,” the SEC sided with Apple and allowed the company to exclude the proposal taking into consideration a board analysis presented by Apple.

Read the full No-Action Letter decision, here.

Also see the full No-Action Letter decision regarding Apple’s denial to exclude a proposal, here.

1 thought on “Update: SEC Denies Apple’s Request to Exclude a Shareholder Proposal”

  1. I really like what you guys tend to be up to.
    This kind of clever work and reporting! Keep up the amazing
    works guys I’ve included you guys to blogroll.

Comments are closed.