Under Rule 14a-8 of the Securities Exchange Act of 1934, shareholders can have their proposals included on company proxy ballots, as long as those proposals are not excluded by the company. One of the bases for exclusion appears in Rule 14a-8(i)(8), which holds that a proposal may be excluded if it "relates to an election for membership on the company's board of directors or analogous governing body."

We have encountered this subject before (many times). It arises again now because the SEC has proposed two releases in connection with shareholder proposals. One would allow companies to exclude proposals that relate "to a nomination or an election for membership on the company's board of directors or analogous governing body or a procedure for such nomination or election," and the other would allow shareholder proposals for shareholder nomination procedures, but by a shareholder or group of shareholders owning more than 5% of the company's securities and eligible to file a Schedule 13G.

Comments on the proposals were due yesterday, and I was one of 39 law professors who signed a comment letter prepared by Lucian Bebchuk of Harvard Law School. You can find the letter here. We admonish the SEC to reject both releases on the following grounds:

• With respect to the release amending the election exclusion, we argue that "the election exclusion of Rule 14a-8(i)(8) should be limited to proposals that relate to a particular election over particular candidates."

• With respect to the release relating to shareholder nomination procedures, we conclude that "shareholders wishing to exercise their state law right to initiate bylaw amendments concerning director nomination should not face higher hurdles than shareholder wishing to initiate other governance bylaws."

If this topic interests you, Jay Brown at Race to the Bottom has a comment letter to the SEC here, and a series of detailed posts here, here, here, here, here, here, and here.

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