One issue that confronted many public companies this year was how to respond when they received multiple shareholder proposals relating to political contributions and lobbying matters. One approach that some companies have turned to relies on Rule 14a-8(i)(11) under the Securities Exchange Act of 1934, which allows a company to exclude from its proxy materials a proposal that “substantially duplicates” another previously submitted shareholder proposal (by another proponent) that will be included in the company’s proxy material for that meeting. This provision is intended to avoid redundancy and reflects the Commission’s position that shareholders should not have to vote on separate but substantially identical proposals.

A recent no-action response by the SEC to a no-action request submitted by WellPoint Inc. highlights the application of these principles to political spending shareholder proposals. In that no-action letter, the SEC agreed with WellPoint that a shareholder proposal requesting a report regarding lobbying contributions and expenditures was substantially identical to a proposal requesting a report regarding political contributions and expenditures.  What is notable about this decision is that, as a technical matter, political contributions are not the same as lobbying expenditures.  One relates to expenditures seeking to influence the election of individuals to public office while the other relates to expenditures seeking to influence the passage or adoption of statutes, regulations, policies and executive orders.  Each are regulated by distinct legal regimes, and frequently by different regulatory bodies at the federal, state and local level.  This distinction was not lost on the AFL-CIO, which was the proponent of the proposal that was to be excluded.  Nevertheless, the staff appears to have adopted the arguments made by WellPoint, namely that both proposals relate to corporate transparency through website disclosure, the supporting statements for both proposals focused on political expenditures and lobbying expenditures, and both proposals sought disclosure regarding payments and activities through trade associations.  The staff apparently reached similar conclusions in 2012 and 2011 in no-action responses to Citigroup and AT&T.

In either case, this is a helpful letter for companies dealing with multiple political spending or lobbying proposals.  The catch of course, is that to rely on this basis for exclusion, a company has to include the first received proposal in its proxy materials.