Questions were raised regarding the application of Article 14a-8(d) to proposals containing graphics and/or images. [14] Staff considered that the use of “500 words” and the absence of an explicit reference to graphics or images in Rule 14a-8(d) do not preclude the inclusion of graphics and/or images in proposals. [15] Just as corporations include graphics that are not expressly permitted under disclosure requirements, the Department considers that Rule 14a-8(d) does not preclude shareholders from using charts to submit information about their proposals. [16] With respect to the 2022 proxy season, it is currently unclear to what extent recent SEC staff`s interpretation of shareholder application rules will have real-world impact. This bulletin sets out the Division`s views on Rule 14a-8(i)(7), the ordinary business exception, and Rule 14a-8(i)(5), the economic relevance exception. We also publish the guidelines contained in SLBs Nos. 14I and 14K on the use of graphics and images, as well as proof of ownership with mostly technical and compliant modifications. In addition, we are providing new guidelines on the use of email to submit proposals, send notices of defects, and respond to these communications. Summary: This employee legal bulletin contains information to corporations and shareholders regarding Rule 14a-8 of the Securities Exchange Act of 1934. In SLB 14L, officials note that they are returning to their approach prior to Section 14I of the SLB, Rule 14a-8(i)(5), pursuant to a decision of the Federal District Court in a 1985 case, Lovenheim v.

Iroquois Brands, in which the court interpreted the words “otherwise significantly connected with the business of the corporation” in Rule 14a-8(i)(5) to mean that a shareholder proposal with a ” ethical or social importance” could not be omitted simply because the proposal was not economically important. Accordingly, SLB 14L continues: “Proposals that raise issues of general social or ethical interest related to the Company`s business cannot be excluded, even if the transaction in question falls within the economic thresholds of Rule 14a-8(i)(5). Given this approach, staff will no longer expect the Committee`s analysis to consider a request for inaction under rule 14a-8(i)(5). In addition, in assessing whether a proposal addresses issues that are “too complex” for shareholders as a group to make an informed judgment,[8] we can take into account the sophistication of investors in general, the availability of data, and the robustness of public debate and analysis on the subject. When evaluating proposals in terms of disclosure, objective and timing, staff may also consider references to established national or international frameworks as an indication of the issues that shareholders are well equipped to evaluate. Rule 14a-8(i)(5), the “economic relevance” exclusion, allows an entity to exclude a proposal that “relates to business activities that, at the end of the last fiscal year, represent less than 5% of the entity`s total assets and less than 5% of its net income and gross sales for the last fiscal year. and has no other material connection with the company`s activity. The repealed SLB 14I addressed the second point of the rule—the importance of the proposal to the entity`s operations—and noted that the staff`s analysis would focus on the importance of a proposal to the entity`s operations if it also involved transactions representing less than 5 percent of the balance sheet total, net profit, and gross turnover. The repealed SLB 14I stated that the burden of proof is on the proponent to prove that a proposal “is otherwise significantly related to the activities of the business”. In other words, if “the significance of the proposal to the activities of a company is not apparent on its face,” it may “be excluded unless the proponent proves that it is “otherwise significantly related to the activities of the business.” As with the exclusion of “ordinary operations” in Rule 14a-8(i)(7), IMF staff had indicated that it would expect an entity`s request for non-action that included an argument of “economic relevance” to include a discussion reflecting the Board`s analysis of the significance of the proposal to the entity and, in turn, “describing specific processes, that the Committee applies to ensure that its findings are well informed and well-founded”. “The proposal required the company to set emission reduction targets and no specific methodology was prescribed to do so,” the staff manual says.