Corporate And Environmental Alert - SEC Reverses Policy On Rule 14a-8 Shareholder Proposals Relating To Environmental And Climate Change Risks

On Oct. 27, 2009, the U.S. Securities and Exchange Commission (SEC) issued Staff Legal Bulletin No. 14E, which reversed the SEC's policy on whether the Boards of Director of public companies can be forced to report on financial risks associated with environmental issues such as climate change. The SEC's policy since 2005 has been that a company may exclude such proposals under Rule 14a-8(i)(7). To date, the SEC's reasoning has been that "an internal assessment of the risks or liabilities that a company faces as a result of its operations that may adversely affect the environment or public health" relates to "ordinary business matters." The SEC's previous policy also excluded proposals that requested that the Board report on the economic benefits of committing to a substantial reduction of greenhouse gas and other emissions related to the company's current business activities. As of Oct. 27, 2009, the SEC has reversed this policy. The SEC now takes the position that such proposals are not excludable where the underlying subject matter of a proposal:

transcends the day-to-day business matters of the company; raises policy issues so significant that it would be appropriate for a shareholder vote; and poses sufficient nexus between the nature of the proposal and the company. The SEC's new policy does not address climate change risk, per...