No-Action Letter for The Walt Disney Co. Did Not Permit Exclusion of "Proxy Access" Bylaw Amendment Proposal

In The Walt Disney Co., 2016 BL 371081 (Feb. 3, 2016), The Walt Disney Company (“Disney”) asked the staff of the Securities and Exchange Commission (“SEC”) to permit omission a proposal submitted by shareholder, James McRitchie, (“Shareholder”) requesting the board of directors (the "Board") amend its "Proxy Access" bylaw, and any other associated documents, to include essential elements for substantial implementation to better facilitate meaningful proxy access by more shareholders. The SEC declined to issue the requested no action letter under Rules 14a-8(c) and 14a-8(i)(10) of the Securities Exchange Act.

Shareholder submitted a proposal providing that:

RESOLVED: Shareholders of The Walt Disney Company (the "Company") ask the board of directors (the "Board") to amend its "Proxy Access" bylaw, and any other associated documents, to include essential elements for substantial implementation to better facilitate meaningful proxy access by more shareholders as follows:


  • 1. The number of "Stockholder Nominees" eligible to appear in proxy materials shall be 25% of the directors then serving or 2, whichever is greater. Current bylaws restrict Stockholder Nominees to 20% of directors. Under the current 12-member board, stockholder nominees are currently limited to nominating two. Any shareholders nominee elected under the current bylaws could be easily isolated.

  • 2. No limitation shall be placed on the number of stockholders that can aggregate their shares to achieve the 3% "Required Shares" for an "Eligible Stockholder." Under current provisions, even if the 20 largest public pension funds were able to aggregate their shares, they would not meet the 3% criteria at most of companies examined by the Council of Institutional Investors. Allowing an unlimited number of shareholders to aggregate shares will facilitate greater participation by individuals and institutional investors in meeting the Ownership Requirements.

  • 3. No limitation shall be imposed on the re-nomination of "Stockholder Nominees" based on the number or percentage of votes received in any election. Such limitations do not facilitate the shareholders' traditional state law rights and add unnecessary complexity.


Disney sought exclusion of the proposal from its proxy materials under subsections (c) and (i)(10) of Rule 14a-8. 

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. In addition, 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.  

Rule 14a-8(c) provides that a shareholder may submit only one proposal to a company per shareholder meeting. A single well-defined unifying concept must bind multiple Proposals together for one proposal.


Rule 14a-8(i)(10) permits a company to exclude a shareholder proposal from its proxy materials if the company has substantially implemented the proposal. The purpose of subsection (i)(10) is to "avoid the possibility of shareholders having to consider matters which have already been favorably acted upon by management." The SEC has considered particular policies, practices, and procedures that compare favorably with the guidelines of the proposal to determine if it is substantially implemented. 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 the Social Policy Proposals?

Disney asserted the proposal should be excluded under subsection (c) because the Shareholder’s proposal was composed of three separate proposals – one proposal seeking to eliminate the limit on the number of aggregate shareholders, one seeking to change the number of director nominees that may be included, and a third seeking to eliminate the limit on nominees who have previously failed to attain the minimum percentage vote. Disney argued the proposal combined “separate and distinct elements that lack a single well-defined unifying concept,” in violation of the regulatory limit in Rule 14a-8(c) of no more than one proposal per shareholder. Therefore, the proposal may be excluded.

Disney also argued it substantially implemented a proxy access bylaw that compared favorably with the guidelines of the proposal. Specifically, the Board adopted a proxy access bylaw in June 2016 already accomplishes the proposal’s objective of “better facilitat[ing] meaningful proxy access by more shareholders.” As such, the proposal was already substantially implemented and should be excluded under subsection (i)(10).


In response, the Shareholder argued the proposal had a "single well-defined unified concept.” Shareholder differentiated the no-action letters Disney cited because none involved a case like this where a proponent sought amendments to a single section of a company's existing proxy access bylaws. The Shareholder also highlighted that Disney freely admitted it took no steps to “substantially implement any measures in the Proposal,” insisting that adopting what has become something of an industry standard for proxy access exempts them from having to include a valid shareholder Proposal for further amendments.


The Commission disagreed with Disney’s reasoning, and concluded Disney may not omit the proposal from its proxy materials in reliance on Rule 14a-8(c) because the proponent submitted only one proposal. It also concluded Disney could not exclude the proposal under subsection (i)(10). Based on the information presented, the Staff was unable to conclude Disney's proxy access bylaw compared “favorably with the guidelines of the proposal.” Accordingly, the Commission did not permit Disney’s exclusion of the Proposal under Rule14a-8(c) or 14a-8(i)(10).


The primary materials for this post can be found on the SEC Website.