The U.S. Securities and Exchange Commission on Friday backed off a ruling it made on when companies may ditch shareholder proposals, drawing praise from activists aiming to add their own directors at grocer Whole Foods Market Inc and other companies.
The SEC said it "will express no views" in the current proxy season on challenges to shareholder proposals that cite similar pending management proposals. That decision followed questions over its application of rules in a case involving the Texas-based grocery chain.
The decision could boost the fortunes of scores of so-called "proxy access" shareholder resolutions seeking the right of investors to list their own director nominees on companies' ballots.
Governance activists have pursued proxy access reforms for years, with a few successes. They got a setback in December when Whole Foods was told by the SEC that it could skip holding a vote on a change proposed by a small shareholder, James McRitchie.
He wanted to allow individuals or groups of shareholders who collectively owned 3 percent of the company for three years to be able to nominate up to two directors on the company's proxy. Whole Foods argued the idea would conflict with its own proposal to allow a single shareholder owning 9 percent or more of the company for five years to put directors on the proxy.
Activists had complained to the SEC that the higher threshold undercut the reform. Citing the Whole Foods decision, roughly two dozen other U.S. companies, ranging from ConocoPhillips to eBay Inc., also had asked the SEC for permission to skip votes on resolutions.
Many of the resolutions were filed by New York City Comptroller Scott Stringer, who oversees its pension funds.
In a statement, Stringer commended the SEC's decision said and the challenge to his proposals "shows that companies are trying to game this process in a way the commission could not have intended."
Officials in his office declined to discuss what exact impact the SEC's move might have on their proposals. But McRitchie, the sponsor of the proposal at Whole Foods, said in an email that the decision was "a great victory for shareholders."
"Whole Foods no longer can exclude my proposal under the cover of a no-action letter from the SEC. I will insist they include my proposal in their proxy," he wrote.
A Whole Foods spokeswoman said it is reviewing the SEC's statement.
