SEC Clarifies Meaning of Rule 14a-8(i)(8):Shareholder Proposals Relating to the Election of Directors
 
January 14, 2008
 

On December 6, 2007, the SEC issued its final rule release clarifying the meaning of Rule 14a-8(i)(8) in light of the recent Second Circuit decision in American Federation of State, County & Municipal Employees, Employees Pension Plan v. American International Group, Inc. (AFSCME v. AIG), 462 F.3d 121 (2d Cir. 2006). In the release, the SEC clarified that Rule 14a-8(i)(8) permits a company to exclude a shareholder proposal under either one of the following two circumstances:

• the proposal results in an immediate election contest by making or opposing a director nomination for a particular meeting
• the proposal establishes a process for a shareholder to conduct an election contest in the future by requiring the company to include the shareholders’ director nominees in the company’s proxy materials for future meetings

The SEC had always interpreted Rule 14a-8(i)(8) in this manner, but the decision in AFSCME v. AIG, in which the Second Circuit determined that a shareholder proposal may be excluded under Rule 14a-8(i)(8) only if it would result in an immediate election contest had created uncertainty with respect to the interpretation of Rule 14a-8(i)(8).

http://www.sec.gov/rules/final/2007/34-56914.pdf