No-Action Letter for Equinix, Inc. Allowed Exclusion of Proxy Access Bylaw
In Equinix, Inc., 2016 WL 110889 (April 7, 2016), Equinix, Inc. (“Equinix”) requested the staff of the Securities and Exchange Commission permit the omission of a proposal submitted by John Chevedden (the “Shareholder”) requesting that Equinix adopt a bylaw that allowed for specific proxy access. The SEC agreed to issue a no action letter allowing for the exclusion of the proposal under Rule 14a-8(i)(10).
Shareholder submitted a proposal providing that:
RESOLVED: Shareholders ask our board of directors to adopt, and present for shareholder approval, a “proxy access” bylaw that . . . require the Company to include in proxy materials prepared for a shareholder meeting at which directors are to be elected by name, Disclosure Statement…of any person nominated for election to the board by a shareholder or an unrestricted number of shareholders forming a group that meets [certain criteria].
Equinix sought to exclude the proposal under subsection (i)(10) of Rule 14a-8.
Rule 14a-8 provides shareholders with the right to include a proposal in the company’s proxy statement. 17 CFR 240.14a-8. The shareholders, however, must meet certain procedural and eligibility requirements. Moreover, the Rule includes thirteen substantive grounds for exclusion. For a more detailed discussion of the requirement of the Rule, see The Shareholder Proposal Rule and the SEC.
Subsection (i)(10) permits a company to omit a proposal if the company has already substantially implemented the proposal. A company meets this standard if its implemented “policies, practices, and procedures compare favorably with the guidelines of the proposal.” The company need not take the exact action requested by the shareholder; it must only implement the proposal’s essential objectives. For a more detailed discussion of this exclusion, see Aren Sharifi, RULE 14A-8(I)(10): HOW SUBSTANTIAL IS “SUBSTANTIALLY” IMPLEMENTED IN THE CONTEXT OF SOCIAL POLICY PROPOSALS?.
Equinix argued the proposal should be omitted under subsection (i)(10) because it adopted an amendment to its bylaws in March of 2016 that satisfied the proposal’s essential objective of providing shareholders a meaningful proxy access right. Specifically, the amended provision allowed any shareholder owning at least 3% or more of the company’s stock continuously for at least three years to nominate candidates for election up to the greater of (1) two candidates, or (2) 20% of our Board, to be included in Equinix’s proxy materials. Equinix believed the proxy access provision in its bylaws compared favorably to, and addressed, the essential objective of the proposal.
The SEC agreed and concluded it would not recommend enforcement action to the Commission if Equinix omitted the proposal from its proxy materials in reliance on subsection (i)(10). The SEC noted the Company’s “board has adopted a proxy access bylaw that addresses the proposal’s essential objective.”
The primary materials for this case may be found on the SEC Website.