Trinity v. Wal-Mart: Banning Shareholders from the Sugar Debate

Trinity v. Wal-Mart is a very poorly reasoned decision.  The court conceded that the shareholder proposal at issue involved matters of important public policy.  Nonetheless, in a made-up test, the court concluded that public policy only trumped the "ordinary business" exclusion of it "transcended" the business of the corporation.

The court gave as an example of its reasoning, the following:  

  • To illustrate the distinction, a proposal that asks a supermarket chain to evaluate its sale of sugary sodas because of the effect on childhood obesity should be excludable because, although the proposal raises a significant social policy issue, the request is too entwined with the fundamentals of the daily activities of a supermarket running its business: deciding which food products will occupy its shelves. 

Coincidentally, the NYT last sunday had an article on this very topic.  See The Decline of Big Soda.  The issue has been much discussed, with consumer behavior changing significantly.  As the article noted: 

  • The drop in soda consumption represents the single largest change in the American diet in the last decade and is responsible for a substantial reduction in the number of daily calories consumed by the average American child. From 2004 to 2012, children consumed 79 fewer sugar-sweetened beverage calories a day, according to a large government survey, representing a 4 percent cut in calories over all. As total calorie intake has declined, obesity rates among school-age children appear to have leveled off.

The issue, therefore, has clear social importance. The majority opinion in Trinity reflects a judicial predilection against the use of the rule to debate matters of public policy that are implicated by the business activities of a public company. To those judges, shareholders ought to have no say in the debate over sugary drinks and obesity. The decision contradicts both the longstanding use of Rule 14a-8 and the growing desire of shareholders to provide advice to companies on matters of important public policy.        

J Robert Brown Jr.