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No-Action Letter for HomeTrust Bancshares, Inc. Allowed Exclusion of Dividend Proposal

In HomeTrust Bancshares, Inc., 2015 BL 289659 (Aug. 31, 2015), shareholder, William R. Dossenbach (“Dossenbach”) proposed HomeTrust Bancshares (“HomeTrust”) issue an annual dividend equal to 50% of after tax profits. The Securities and Exchange Commission (the “Commission”) ultimately concluded it would not recommend enforcement action if HomeTrust omitted the proposal from its annual proxy statement.

Dossenbach’s proposal requested the following: "Effective for fiscal year 2016 and thereafter HomeTrust Bank shall annually pay a dividend of 50% of after tax profits. The dividend shall be paid in 4 quarterly payments with a Special 5th payment, after year end, to complete the 50%."

HomeTrust argued the Commission consistently permitted the exclusion of proposals that created a specific formula for payment of cash or stock dividends. HomeTrust argued that Dossenbach’s proposal was effectively identical to many of these proposals. Dossenbach did not respond to HomeTrust’s arguments.

Rule 14a-8 provides the substantive and procedural requirements for when a company must include a shareholder proposal in its proxy materials. A company may exclude a shareholder proposal if the proposal does not meet the eligibility or procedural requirements of Rule 14a-8. To be eligible for the Rule, a shareholder must own the lesser of 1% of the voting securities of the company or hold $2,000.  The proposal cannot be more than 500 words. Additionally, companies may exclude proposals that fall under one of thirteen substantive exceptions provided in Rule 14a-8(i).  Subsection (i)(13) allows for the exclusion of proposals that relate “to specific amounts of cash or stock dividends.”

The Commission agreed with HomeTrust’s reasoning. On August 31, 2015, the Commission decided it would not recommend enforcement action if HomeTrust omitted the proposal from its proxy materials under 14a-8(i)(13) because the proposal related to specific calculations of cash dividends.

The primary materials for this post can be found on the DU Corporate Governance website.

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