Securities Regulation Keyed to Coffee
American Federation of State, County & Municipal Employees, Employees Pension Plan v. American International Group, Inc.
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A substantial shareholder of American International Group (AIG), the American Federation of State, County & Municipal Employees (AFSCME) (Plaintiff), submitted a shareholder proposal to be included in AIG’s proxy statement for the company’s yearly meeting that, if enacted, would necessitate AIG to amend its bylaws to insist that under particular circumstances, AIG had to disclose the names of shareholder nominated director position candidates along with any AIG board of directors nominated candidates. A no-action correspondence was received from the SEC’s Division of Corporate Finance (Division) signaling that it would fail to take action against AIG if the proxy statement was missing the proposal, based on that the proposal could be omitted when relating “to an election,” as per SEC Rule 14a-8(i)(8). For over 15 years, the SEC construction of Rule 14a-8(i)(8) had been that it correlated to only shareholder proposals utilized to oppose solicitations involving an identified board seat in a forthcoming election and denied the slightly broader construction that the Rule’s election exclusion was applicable to shareholder proposals that would implement procedures making election contests more probable. When the SEC amended the rule it clarified that that "with respect to corporate elections, Rule 14a-8 is not the proper means for conducting campaigns or effecting reforms in elections of that nature [i.e., "corporate, political or other elections to office"],since other proxy rules, including Rule 14a-ll, are applicable thereto."Specific disclosures are required by Rule 14a-ll (now renumbered to Rule 14a-12) when a solicitation is created to oppose a solicitation by any other individual regarding the election or removal of directors. The scope of the election exclusion fails to cover shareholder proposals involving issues like cumulative voting and general director requirements (both have the ability to up the chance of election contests), the SEC explained. Then the SEC reversed and interpreted the Rule to be applicable to proxy access bylaw proposals, as signified by the no-action letter to AIG. As a result of that letter, AIG omitted the proposal from its proxy statement and AFSCME brought suit seeking a court order that would compel AIG’s next proxy statement to contain the proposal. The district court denied AFSCME's request for declaratory and injunctive relief was denied by the district court and dismissed the action. A review was granted by the court of appeals.
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