Memo to Chairman Paul Atkins re Rule 14a-8 Reform

Why not move the whole "shareholder democracy" project to zero-slate proxy contests?

As regular readers know, I do not believe in “shareholder democracy.”

But if we must have some shareholder democracy, why does it have to be through precatory proposals under Rule 14a-8?

We have frequently recounted the many problems with Rule 14a-8 in these pages, but just to refresh your recollection they include:

• Gadflies with little skin in the game spam dozens of company proxy statements every year.

• The 14a-8(i)(5) and (i)(7) exclusions allow proposals that have supposed social or ethical significance onto the proxy statement even when they have virtually no economic materiality to the company.

• Few proposals receive majority support, indicating that the vast majority of proposals are pet projects of a small minority and do not reflect the desires of the bulk of investors.

• There is no empirical data suggesting that the shareholder proposal rule results in better firm performance.

• Shareholders generally lack the information necessary to make complex business decisions.

In order of preference, my reform proposals have been: Repeal > Private ordering,

But today I offer a third option: Relocation.

If we must have a shareholder democracy project, let’s move that project from Rule 14a-8 to 14a-4. I speak, of course, of the so-called zero slate proxy contest.