2. Rule 14a-8(a)(1) currently requires that a shareholder have held a market value of $1,000 or 1% less of the voting shares of the Corporation at the time a proposal is submitted. We are proposing to adjust the $1,000 requirement to reflect inflation since it was introduced in 1983. 106 The amended rule, which would be included in the answer to question 2, would require the continuous holding of a market value of USD 2,000 of the voting shares of the corporation. While the actual adjustment for inflation from the date of adoption to today would increase the current requirement by about $600, we suggest $2,000 to account for future inflation and because it will be easier to use for calculations. We have tried to avoid a further increase in the threshold because we are concerned that a larger increase will restrict access to corporate voting materials for small shareholders who, like other holders, have a vested interest in maintaining channels of communication with management and other shareholders. We are asking you whether we should use a higher number like $3,000, $5,000 or $10,000, or a lower number like $1,500. The changes will take effect 60 days after they are published in the Federal Register, and the final amendments will apply to any proposal submitted for an annual or special session on or after January 1, 2022. The final rules also provide a transition period with respect to ownership thresholds, allowing shareholders to rely on the ownership threshold of $2,000 per year for proposals submitted to an annual or special meeting before January 1, 2023.

To address concerns that an attorney`s efforts to secure shareholder support to benefit from the waiver may be deterred by concerns about filing triggering and other obligations under Section 13(d)90 or 14(a)91 of the Exchange Act, we are also proposing a new safe haven from the beneficial ownership declaration requirements of 13(d) “Group.” and a new exception to the authorization rules in rule 14a-2. In response to the questionnaire, companies indicated that Rule 14a-8 operates in a way that requires them to include too many suggestions that are of little or no relevance to their business. 60 We believe that the proposed revisions address this issue by establishing clearer and more predictable criteria for excluding proposals. The proposed revisions also aim to make it easier for companies to exclude economically insignificant proposals. The approach appears to compensate for various competing concerns, as companies may also not be able to exclude certain proposals – of relatively greater economic importance – that they are currently allowed to omit under the current 5% criterion as a result of the proposed revision. The proposed new approach, which asks whether the company has considered the essential elements of the proposal, is a reasonable approach. This would remove most of the subjectivity of the essential implementing provisions and encourage proponents to clearly articulate the essential elements when drafting their proposals. The shareholder proposal rule provides a means of communication between shareholders and corporations, as well as between shareholders themselves. However, like any other busy road, the rule needs to be fixed. These proposals therefore aim to respond to the problems identified by both shareholders and companies. We considered significant alternatives to the proposed changes for junior companies with a class of securities registered under the Exchange Act.

We could, for example, exempt small businesses from the requirement to include shareholder proposals in their proxy documents. However, such an exception would be contrary to the current purpose of the proxy rule, which is to provide and regulate a channel of communication between shareholders and public undertakings. Exempting small businesses would deprive their shareholders of this communication channel. We believe it is worth examining whether there is a viable alternative approach to the current rules and processes. Among other things, the current regime places the Commission and its staff in the role of informal arbiter between corporations and shareholders, who submit an increasing variety of shareholder claims. In the context of the implementation of Articles 14a to 8, the Commission and its services are sometimes called upon to make difficult judgments on the correct interpretation of proposals and on the issues to which they relate. Should these judgments be made by institutions other than the Commission or by shareholders and companies themselves? We welcome your comments on these issues. Current paragraph (c)(7) allows for the exclusion of proposals relating to the “ordinary course of business” of a corporation. We recognize that the term “ordinary business” is a legal term that provides little guidance on the types of matters to which it relates. We therefore propose to revise the paragraph to allow for the exclusion “where the proposal concerns certain business decisions that are normally left to the discretion of management”.

The revised rule would include a list of examples that are not exclusive, including how a newspaper formats its stock tables, whether a company charges an annual fee for the use of its credit card, the salaries a company pays to its non-management employees, and how a company manages its dividend reinvestment plan. For an investment company, an example is deciding whether or not to invest in the securities of a particular company. In response to the questionnaire, companies indicated that they were aiming for clearer ground rules and avoided delays and potential costs when they were informed of potential proposals after they started printing or even sending proxy documents to shareholders.