No-Action Letter for Deere & Company Permitted Exclusion of Emissions Elimination Proposal

In Deere & Co., 2016 BL 406370 (Dec. 5, 2016), Deere & Company (“Deere”) requested the staff of the Securities and Exchange Commission (“SEC”) permit omission of a proposal submitted by Christine Jantz (“Shareholder”) requesting the board of directors generate a plan to reach net-zero greenhouse gas emissions by the year 2030. The SEC agreed to issue the requested no-action letter allowing for exclusion of the proposal under Rule 14a-8(i)(7).

Shareholder submitted a proposal stating:


  • RESOLVED: Shareholders request that the Board of Directors generate a feasible plan for the Company to reach a net-zero [greenhouse gas] emission status by the year 2030 for all aspects of the business which are directly owned by the Company, including but not limited to manufacturing and distribution, research facilities, corporate offices, and employee travel, and to report the plan to shareholders at reasonable expense, excluding confidential information, by one year from the 2017 annual meeting.


Deere argued the proposal may be excluded from its proxy materials under Rule 14a-8(i)(7).

Rule 14a-8 provides shareholders with the right to insert a proposal in the company’s proxy statement. 17 CFR 240.14a-8. The shareholders, however, must meet certain procedural and ownership requirements. The Rule includes thirteen substantive grounds for exclusion. For a more detailed discussion of the requirements of the Rule, see The Shareholder Proposal Rule and the SEC.

Under Rule 14a-8(i)(7), a company may exclude proposals that relate to the company’s “ordinary business” operations. The SEC understands “ordinary business” to mean the issues that are fundamental to a company’s management abilities on a day-to-day basis. If the proposal, however, raises a significant social policy issue, the proposal may not be excluded as long as a “sufficient nexus exists between the nature of the proposal and the company.” For additional explanation of this exclusion see Megan Livingston, The “Unordinary Business” Exclusion and Changes to Board Structure, 93 DU Law Rev. Online 263 (2016), and Adrien Anderson, The Policy of Determining Significant Policy under Rule 14a-8(i)(7), 93 DU Law Rev. Online 183 (2016).

Deere argued for omission under Rule 14a-8(i)(7) because the proposal detailed how the board of directors should plan to reduce emissions and would “transfer responsibility for critical operational and production decision-making from the board and management to the shareholders”.  Deere further argued the social policy exception should not apply given the absence of a clear nexus between climate change and the machinery manufacturing business. Even if the SEC determined the nexus sufficient, the proposal sought to micromanage by imposing a time frame for complex policy implementation, thus the social policy exception still would not apply.

In response, the Shareholder argued catastrophic climate change implicated a significant policy issue with a clear nexus to Deere because large manufacturing companies had energy-intensive operations. The Shareholder further asserted the proposal did not micromanage as it gave Deere the flexibility to determine the means of greenhouse gas elimination and only provided an overall goal.

The SEC agreed with Deere’s reasoning, and concluded Deere may exclude the proposal under subsection (i)(7). The staff noted the proposal sought to micromanage the company by probing too deeply into complex matters beyond the shareholders purview. Therefore, the staff concluded it would not to recommend enforcement of action for the proposal’s omission from proxy materials.

The primary materials for this case may be found on the SEC website.