SharkRepellent.net documents the use of PX14A6G filings surged in 2012, Proponents Increasingly Proactive Promoting Their Issues. According to John Laide’s post, the number of such campaigns had already reached 45, versus 27 during all of last year.
Read any good PX14A6G filings lately? During the 2012 proxy season, sponsors of shareholder proposals have been increasingly making use of rules allowing them to further press their case to stockholders to support their issues. Pursuant to Rule 14a-2(b)(1) of the Exchange Act, a shareholder can freely communicate its views to stockholders without having to comply with the proxy filing and disclosure rules associated with a contested solicitation if it is not seeking proxy voting authority (i.e. the shareholder is not seeking the power to act as proxy for a stockholder and does not provide its own proxy card in its materials). The filing itself generally takes the form of a letter to fellow shareholders attempting to persuade them to vote for a proposal the shareholder is sponsoring, to vote against a management proposal, or to withhold votes for directors, and will appear on the SEC’s EDGAR filing system alongside the company’s other filings. An exempt solicitation provides an easy, cost-effective way for proponents to express their views and lobby fellow shareholders beyond the 500-word limit imposed by Rule 14a-8 for a proposal and supporting statement in the company’s proxy statement.
More exempt solicitations have been filed since the SharkRepellent.net report. For example, here’s one from New York State Common Retirement Fund, urging shareowners to “WITHHOLD your votes from directors V. Burns Hargis and Richard K. Davidson at Chesapeake’s (CHK) annual meeting of stockholders. The two major proxy advisory firms, Glass Lewis and ISS, agree with my voting recommendation to withhold support from these directors.”
New York State Comptroller, Thomas P. DiNapoli, goes on to note a declining stock price, $4.0 billion unsecured loan with an effective yield of 14%, loans to CEO Aubrey McClendon of over $1 billion, $1.4 billion of previously unreported liabilities that relate to ten “volumetric production payments,” and more.
Withholding your votes for the re-election of Directors Hargis and Davidson is a necessary first step toward reconstituting a Board that is currently entrenched and unaccountable to shareholders.
Here’s another such filing on Chesapeake (CHK) from CalPERS in support of their proposal #9 to eliminate supermajority requirements and the City of New York Office of the Comptroller’s proposal #10 to allow proxy access.
Why aren’t all shareowner proponents filing exempt solicitations to the SEC? It looks like the SEC charge for registering is minimal. Here’s the form for obtaining CIK and CCC codes from the SEC. The main cost appears to be formatting each exempt solicitation. Using a typical service to “EDGARize” a typical press release costs about $100. (If you know of much less costly services, let me know.) The less expensive option is to learn how to file the PX14A6G filings yourself. It looks like the SEC has three handy dandy EDGARLink Filer Manuals (Rel 9.0). For some reason, I get the feeling that by the time I’m done reading volume 3, release 10 will be out and I’ll have to start all over again. Shortcuts anyone?
Where can we expect growth? The biggest user of PX14A6G filings since 2006 has been CalPERS, with 37 campaigns. The City of New York Office of the Comptroller filed 8. How many proposals did they submit? According to an earlier SharkRepellent.net report, 2011 Proponent Ranking, CalPERS didn’t rank in the top 10. NYC ranked 3rd with 30. Four of the top five proponents were individuals or families, with the Chevedden family submitting 70.
Individuals submitted 358 proposals in 2011 and didn’t make use of PX14A6G filings, as far as I can tell, whereas public pension funds filed 96 proposals and a few just began to really start filing exempt solicitations in earnest this year.
Takeaway: Edgarizing services, there’s a new market for you. Lower your price a bit and start helping individual shareowner proponents to file.
To contact James McRitchie directly, please email jm@corpgov.net
