US retail giant Wal-Mart Stores is seeking to overturn a court decision that obliges it to include a shareholder proposal calling for a review of the sale of high-powered guns at its annual meeting (AGM) this year.
The proposal, from $835m (€737m) New York-based church investor Trinity, wants the board charter to be amended to include oversight of the gun sales to determine “the risks that these sales pose to the public and to the company’s reputation and brand value.” The investor cited the massacres of elementary school children in Connecticut in late 2012 and high school students in Colorado in April 1999.
Trinity had wanted Wal-Mart’s shareholders to vote on its proposal at the company’s 2014 AGM. However, in late March, the Securities and Exchange Commission (SEC) approved the company’s request to omit it from the 2014 proxy materials over a rule [14a-8(i)(7)] that states that shareholder proposals that “affect ordinary business operations” may be excluded. Trinity challenged this at a district court in Delaware and in late 2014, the court ruled that Wal-Mart should have allowed the proposal, as it seeks action from the board, not management.The district court also said that, as Trinity’s proposal dealt with social policy issues, it transcended the retailer’s ordinary business.
Wal-Mart now wants an appellate court to overturn the lower court’s ruling, arguing that it would render meaningless years of SEC precedent.
“Absent reversal, the exceptions created by the court would swallow the rule, undo nearly 40 years of SEC guidance on Rule 14a-8(i)(7), and flood public companies with proposals that subject to shareholder vote decisions regarding ordinary business matters,” Wal-Mart’s lawyers wrote in the brief filed with the appellate court.
The lawyers added: “By holding that Trinity’s proposal is not excludable because it does not dictate to management and instead would be felt at the Board level, the court has created what amounts to a board action exception to Rule 14a-8(i)(7), notwithstanding the SEC’s plain guidance that no such exception exists.” Wal-Mart is to hold its AGM on June 5.