Thursday, April 05, 2018

Twitter may not omit shareholder proposal to create board committee on social issues

By Lene Powell, J.D.

In a no-action letter, Division of Corporation Finance staff said Twitter, Inc. may not omit a shareholder proposal to create a Public Policy Committee of the Board of Directors to oversee the company’s activities on broad public policy issues including human rights and corporate social responsibility. Although Twitter told the SEC that management of public policy issues is already intrinsically embedded in its current board activities, the Division concluded that Twitter’s policies, practices, and procedures do not compare favorably with the proposal and, therefore, the company has not substantially implemented the proposal.

Proposed committee on public policy. According to proponent Jing Zhao, who holds 205 shares, Twitter has become the most used public policy platform in the world. He urged the company to establish a Public Policy Committee of the Board of Directors to oversee Twitter's policies and practice that relate to public policy issues including human rights, corporate social responsibility, charitable giving, political activities and expenditures, foreign governmental regulations, and international relations that may affect Twitter's operations, performance, reputations, and stockholders value.

Zhao noted that staff did not concur when Apple tried to exclude his similar proposal in December 2017 and that Facebook included a similar proposal in its 2016 shareholder meeting.

Request for relief. Twitter asked staff to concur in its view that it may omit the proposal from its 2018 proxy materials in reliance on Rule 14a-8(i)(10) because the proposal has already been substantially implemented. Twitter said it is “acutely aware” that public policy issues are “core” to the company’s business due to its unique platform and business model. But the company said its board already provides the oversight requested, and described its oversight regime:
  • The overall board oversees senior management and day-to-day risks; 
  • The Audit Committee is responsible for oversight of the overall adequacy and effectiveness of the company’s legal, regulatory, and ethical compliance programs. In this capacity, it has been at the forefront of key issues of privacy, net neutrality, cybersecurity, freedom of expression, rights of publicity, and protection of minors; 
  • The Nominating and Corporate Governance Committee has sought out board members that can contribute specific policy perspectives and advice; 
  • The Compensation Committee’s work heavily involves human rights and corporate social responsibility with respect to the company’s employment practices across the world. 
In addition to board oversight, the company has a Public Policy function, which is a team of employees throughout the world who have direct responsibility for various policy matters and act as ambassadors of the company to government policymakers, regulators, and civil society groups. Twitter further pointed to a long list of social programs and initiatives, including charitable programs, diversity initiatives, civic engagement, and a political action committee.

SEC response. Division staff was unable to concur that the company may exclude the proposal under rule 14a-8(i)(10) because it did not appear that Twitter’s policies, practices, and procedures compare favorably with the proposal. Accordingly, staff did not believe that the company may omit the proposal from its proxy materials in reliance on rule 14a-8(i)(10).