Monday, December 12, 2016

Companies can omit climate change shareholder proposal

By Joanne Cursinella, J.D.

Identical shareholder proposals from a single proponent to require two companies to come up with a feasible plan to reach a net-zero greenhouse gas emission status by 2030 received no-action clearance for exclusion from the companies’ proxy materials. In each case, the Division of Corporation Finance found that the proposal could be excluded because it related to the companies’ ordinary business operations.

Proposal. Shareholder Christine Jantz, as an individual and on behalf of Jantz investment management firm, submitted identical shareholder proposals to both Deere & Company and Apple seeking to limit their amount of green gas emissions by requiring each company to present a plan to its shareholders for net-zero emission status for all aspects of the business directly owned by the company—including manufacturing and distribution, research facilities, corporate offices, and employee travel.

Jantz claimed that the proposal was valid for each company to include in its proxy materials because it addresses a significant policy issue of rapidly escalating global need to eliminate greenhouse gas emissions in order to head off “catastrophic climate change."

In response, both companies sought no-action relief from the Commission. They claimed they could exclude the proposal under Exchange Act Rule 14 a-8 because it concerns a matter of ordinary business operations. Apple also claimed, among other things, that the proponent misread its public statements and that her purported reliance on a “technical report” issued by First Solar, Sustainable Development in 2012 is misplaced because it does not relate to its business. Deere pointed out that, contrary to her claims, its absolute energy consumption and absolute emissions have decreased between 2012 and the end of 2015.

No-action relief. In grating the identical relief to both companies, the Division noted that there was some basis for the view that each company may exclude the proposal as relating to its ordinary business operations and that it seeks to micromanage each company by “probing too deeply into matters of a complex nature” that shareholders, as a group, would not able to make an informed judgment about.