No-Action Letter for Qualcomm Permitted Exclusion of Proposal to Allow Simple Majority Vote
In QUALCOMM, Incorporated, 2017 BL 441240 (Dec. 8, 2017), QUALCOMM, Inc. (“QUALCOMM”) asked the staff of the Securities and Exchange Commission (“SEC”) to permit the omission of a proposal submitted by James McRitchie (“Shareholder”) to remove each voting requirement in QUALCOMM’s charter and bylaws that called for a greater than simple majority vote. The SEC issued the requested no action letter allowing for the exclusion of the proposal from QUALCOMM’s proxy statement under Rule 14a-8(i)(10).
Shareholder submitted a proposal providing that:
RESOLVED, Shareholders request that our board take each step necessary so that each voting requirement in our charter and bylaws that calls for a greater than simple majority vote be eliminated, and replaced by a requirement for a majority of the votes cast for and against applicable proposals, or a simple majority in compliance with applicable laws. If necessary this means the closest standard to a majority of the votes cast for and against such proposals consistent with applicable laws. It is important that our company take each step necessary to adopt this proposal topic. It is important that our company take each step necessary to avoid a failed vote on this proposal topic.
QUALCOMM argued the proposal may be excluded from the company’s proxy materials for its 2018 Annual Meeting of Stockholders under Rule 14a-8(i)(10).
Rule 14a-8 provides shareholders with the right to insert a proposal in a company’s proxy statement. 17 CFR 240.14a-8. Shareholders must meet certain procedural and ownership requirements. Rule 14a-8 also 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 and The Shareholder Proposal Rule and the SEC (Part II).
Rule 14a-8(i)(10) permits a company to exclude shareholder proposals from its proxy materials “if the company has already substantially implemented the proposal.” The SEC considers whether the company’s policies, practices, and procedures compare favorably with the guidelines of the proposal and whether the company satisfied the “essential objective” of the proposal. For additional information on the exclusion, see Aren Sharifi, Rule 14a-8(I)(10): How Substantial is “Substantially” Implemented in The Context of Social Policy Proposals?, 93 DU Law Rev. Online 301 (2016).
QUALCOMM argued the Shareholder’s proposal should be excluded under Rule 14a-8(i)(10) because the essential purpose of the proposal had been substantially implemented by the Board of Directors when it approved amendments to the company’s certificate of incorporation and bylaws to remove all existing super majority voting requirements and recommend stockholders vote for these amendments. The Board implemented these changes on October 9th, 2017, upon recommendation of the Governance Committee.
The staff reasoned that QUALCOMM had submitted a proposal of its own which fulfilled the essential purpose of the Shareholder’s proposal and issued the requested no-action letter under Rule 14a-8(i)(10).
The primary materials for this post may be found on the SEC website.