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The Rule 14a-8 Shareholder Proposal

Author
Affiliation

Mike P. Sinn

International Campaign to End War and Disease

Abstract

If the defendant board’s response to the demand letter is inadequate, the next step is to file a shareholder proposal under SEC Rule 14a-8 requiring the board to commission and disclose an independent ROI analysis of the company’s lobbying expenditure. The proposal must fit on the company’s proxy ballot, the supporting statement is capped at 500 words, and the SEC’s no-action letter process can exclude the proposal if it’s procedurally defective. This page provides the proposal text, the supporting statement, the cover letter, and the SEC no-action defense.

Keywords

SEC Rule 14a-8, shareholder proposal, proxy ballot, lobbying disclosure, corporate governance

STATUS: DRAFT. Securities counsel must review before submission. Rule 14a-8 has strict eligibility, timing, and exclusion rules that are easy to fail by accident.

Eligibility

Rule 14a-8(b) requires continuous ownership of $2k/3yr, $15k/2yr, or $25k/1yr. The single-share demand-letter plaintiff doesn’t meet this on day one; find a co-filer with the required history, or engage As You Sow as the eligible filer. Counsel verifies before submission.

The Proposal (ballot text)

The proposal must fit in 500 words including the supporting statement. The ballot resolution itself should be a single resolved clause.

Shareholder Proposal: Independent ROI Analysis of Lobbying Expenditure

RESOLVED: Shareholders request that the Board of Directors of [COMPANY NAME] commission and publicly disclose, within 12 months of the annual meeting, an independent return-on-investment analysis of the Company’s federal lobbying expenditure. The analysis shall: (a) quantify the direct and indirect effect of the Company’s lobbying on the size of the federal budget, the federal defense appropriation, and the Company’s contracted revenue; (b) account for the effect of the maintained ratio of military spending to government clinical-trial spending on US and global GDP growth over a 20-year horizon, including comparison to a scenario in which 1% of military spending is redirected to pragmatic clinical trials; (c) be prepared by an independent firm not currently or previously engaged by the Company for governmental affairs, lobbying, or appropriations consulting; (d) be published on the Company’s investor relations website and included in the next proxy statement.

Supporting Statement (500 words including resolution)

The supporting statement appears below the resolved clause on the proxy ballot. Together they cannot exceed 500 words. Count carefully.

Supporting Statement.

The proponent loves the members of this Board. The proponent does not want them, their spouses, their children, their grandchildren, or their fellow shareholders to die of pancreatic cancer, Alzheimer’s, ALS, cardiovascular disease, or any of the other conditions whose candidate treatments are currently sitting in the untested-compound queue (including metformin, rapamycin, and low-dose naltrexone, which have public research support and no funded large-scale trials). This proposal asks the Board to find out whether the Company’s lobbying is making those deaths more likely than they would otherwise be.

The Company spent approximately $[X] million on federal lobbying in fiscal year [YEAR], substantially all of it directed at maintaining or increasing federal military appropriations. Global military spending is approximately $2.7 trillion per year. Global government clinical-trial spending is approximately $4.5 billion per year. The ratio is 604 (95% CI: 453-894) to 1. Independent modeling projects that a 1% redirection of military spending to pragmatic clinical trials compresses the disease-eradication timeline from 443 years to 36 years and produces global GDP at year 15 of approximately 4.1x (95% CI: 2.02x-8.62x) the current trajectory.

If that model is approximately correct, the Company’s lobbying is suppressing the long-term growth of its own addressable market and is delaying the development of the treatments that would otherwise extend the lives of every Board member and every shareholder. The average shareholder loses approximately $3.48 million (95% CI: $1.05 million-$9.82 million) in lifetime income and approximately 12 years (95% CI: 8 years-18 years) of healthy life.

The Board has not, to shareholders’ knowledge, conducted an ROI analysis of this expenditure that accounts for its macroeconomic effect or its effect on the actuarial life expectancies of the people the Board represents. The proposal asks the Board to commission that analysis. The analysis does not predetermine its conclusion. It asks the question.

Continuing to spend $[X] million annually on a recurring expenditure that has never been ROI-tested, while it may be increasing the probability that the Board members and their families die of preventable disease, is the only outcome that benefits no one. If this proposal is defeated, the lobbying continues; if the lobbying continues, the diseases that will kill every shareholder casting a vote on this proposal remain in the untested-compound queue. A vote against this proposal is, in actuarial terms, a vote against the voter’s own life expectancy.

Shareholders are urged to vote FOR this proposal.

Submitted with love and respect by [PROPONENT NAME], holder of [N] shares of [COMPANY] common stock, owned continuously for at least [X] years.

Cover Letter to Corporate Secretary

The proposal is delivered with a cover letter that establishes Rule 14a-8 eligibility and notice. Send by certified mail and email simultaneously.

[PROPONENT NAME] [ADDRESS] [DATE]

Corporate Secretary [COMPANY NAME] [ADDRESS]

Re: Shareholder Proposal for the [YEAR] Annual Meeting Pursuant to SEC Rule 14a-8

Dear Corporate Secretary,

I am submitting the enclosed shareholder proposal for inclusion in [COMPANY]’s proxy materials for the [YEAR] annual meeting of shareholders, pursuant to Rule 14a-8 under the Securities Exchange Act of 1934.

Eligibility (Rule 14a-8(b)). I have continuously held at least $[2,000 / 15,000 / 25,000] worth of [COMPANY] common stock for the past [3 / 2 / 1] year(s). Documentation of ownership is enclosed in the form of a letter from my broker dated [DATE] confirming the position and the holding period. I intend to continue holding the required position through the date of the [YEAR] annual meeting.

Intent to present. I intend to be present at the [YEAR] annual meeting to present the proposal, in person or by a designated representative.

Proposal text. The proposal and supporting statement are enclosed and total [N] words, within the 500-word limit set by Rule 14a-8(d).

Notice of related materials. I refer the Board to the shareholder demand letter previously delivered on [DATE OF DEMAND LETTER], which is incorporated by reference. The demand letter set forth the substantive analysis underlying this proposal. The Board’s response to that demand letter, [if any was received], has been considered and does not substantively address the question this proposal asks.

I welcome dialogue with the Board or management on the proposal. I would prefer dialogue to the alternative, because the alternative is that the Board members, their families, and the shareholders this proposal asks the Board to protect continue dying earlier than the math says they could have lived. I am reachable at [EMAIL] and [PHONE]. I would rather have lunch with you than file the derivative complaint.

Respectfully and with care for the recipients of this letter and their families,

[PROPONENT NAME]

Enclosures: 1. Shareholder proposal and supporting statement 2. Broker letter confirming continuous ownership 3. Statement of intent to hold and present

cc: [COUNSEL NAME], [LAW FIRM]

Timing and Process

Submit at least 120 days before the anniversary of the prior year’s proxy mailing. The company has 14 days to challenge eligibility and 80 days to file an SEC no-action request (counsel handles the response; common exclusion grounds are Rule 14a-8(i)(1), (i)(5), (i)(7), (i)(10)). SEC staff typically responds in 30-60 days. If no-action denied, the proposal goes on the ballot; if granted, refile next cycle.