After you've filed your resolution with the firm, the company will review your document. If it plans to exclude the document, it must notify you and the SEC at least 80 days before it plans to mail its proxies (usually about 30 days before the annual meeting) and explain why, in the company's view, the proposal can be excluded under one or more of the grounds for exclusion set out in SEC Rule 14a-8. Some of grounds for exclusion may be technical, such as if you held less than $2000 in stock for the year prior to submitting the resolution, or if you missed the filing deadline. Other objections may focus on one of 13 exclusions established by the SEC to limit the number of resolutions appearing on a company's proxy materials to those items which the SEC thinks are significant enough for shareholders to consider. Of these, perhaps the most significant is the one that allows an exclusion of matters relating to the "ordinary business" of the company .

Two case studies follow which are illustrative of proxy fights between companies who want to throw a shareholder resolution out, and shareholders who defend their resolution. The following Wal-Mart resolution deals with the SEC exclusion based on ordinary business. The Freeport resolution deals with the SEC exclusions on false and misleading information, actions beyond the power of the company to effectuate, mootness and ordinary business.

 
1998 Resolution at Wal-Mart:

Compliance with its labor standards for overseas suppliers

This case illustrates how drafting an overly-specific resolution can give grounds for a company to omit a shareholder proposal. Whereas the SEC approved a more general resolution at Dillard's Inc. on labor standards of overseas suppliers, this resolution specifically asked for a company report on wages, which the SEC viewed as an ordinary employment issue.  

• 1998 proposed Wal-Mart resolution - note the five specific points the shareholders wanted the report to cover
• Wal-Mart's request to the SEC for a no-action letter (Wal-Mart's attempt to throw the resolution out) - the company cites precedence, by naming other employment resolutions which the SEC has thrown out
• Shareholder's rebuttal - the shareholder rebuts each of the cited cases, and demonstrates that the issue is not mundane, nor lacking in policy significance. The proponent cites news articles, consumer studies, Congressional and White House activity, etc.
• Wal-Mart's final response - the company cites past SEC rulings demonstrating that tying social issues to employment issues doesn't take employment matters out of the realm of ordinary business.
• SEC's no action letter - rules in the company's favor

Environmental and indigenous rights issues in Irian Jaya, Indonesia

This case illustrates how a shareholder amended its original shareholder resolution in response to Freeport's efforts to exclude this proposal from the proxy statement. It also illustrates how shareholder activists used their knowledge about the company's operations to respond in detail to the company's request for a no action letter. Finally, the case demonstrates how a shareholder can take issue with a company's proposed statement of opposition to their resolution, which is printed directly after the resolution in the proxy statement.  Many of the appendices (articles, letters, press releases, etc.) used by the proponent to defend its resolution can be found in the Index of Documents.  

• The Filing Letter (and Enclosure) for the 1997 Freeport-McMoRan Shareholder Resolution
• The Original 1997 Freeport McMoRan Resolution
• Freeport's request for a no-action letter - note that the company claims that "the proponent…is misinformed and appears to have accepted at face value the propaganda of certain activist groups." The company claims that some parts of the resolution are:
• False and misleading (e.g. uses the word "dumps" to describe how the company deals with ground rock; claims that a particular group "represents" the indigenous people; states that its liabilities are unclear when it is inherently difficult to estimate liabilities),
• Beyond the power of the company to effectuate (e.g. a "just, accepted, peaceful and permanent resolution of indigenous concerns" is too vague to effectuate),
• Moot (e.g. the company already publicly reports under SEC regulations)
• Ordinary business (e.g. shareholders aren't qualified to make informed judgments on complex issues)
• Shareholder's rebuttal
• False and misleading statements - note that the proponent offers to change the word "dumps" to "discharges,"; how the proponent backs up the fact that a particular group represents the indigenous people with company quotes, examples of company programs, and independent reports; and how the proponent offers to add language referring to environmental audits to satisfy the arguments posed by the company regarding liability.
• Beyond the power of the company to effectuate - note how the proponent states that they "leave it to the good faith of the Company" to give clarity to the vague nature of the conditions, and stresses that the proposal asks the company to "take steps."
• Moot - note how the proponent offers to completely omit the request for a report
• Ordinary business - the proponent stresses that broad environmental policy has been deemed by the SEC has a legitimate shareholder concern, and talks about the extraordinary nature of the company's problems with this mine.
• Company's reply - the company rebuts some of the points raised by the shareholders and encloses recent news clips to back up one of their arguments.
• Response of the SEC - the SEC was unable to concur with Freeport's views that the resolution was beyond the power of the company to effectuate, moot, and ordinary business; but the SEC did think that some of the language should be revised so as to not make the resolution false and misleading.
• Final resolution - the proponents agree to language changes per SEC's response and submit their final resolution for inclusion into the proxy statements.
• Draft statement of opposition - the company drafts a statement in opposition to the resolution to be printed in the proxy materials
• Shareholder response to draft statement of opposition - the shareholder claims that some parts of the company's statement of opposition are false and misleading
• Final statement of opposition - the company is required to say that that its dialogue with the shareholders was not fruitful, rather than saying that the shareholders refused to meet with the company.