Issue link: https://digital.shearman.com/i/1019978
Shearman & Sterling LLP Shareholder Proposals 2018 – Was 14I Really a Game Changer? | 67 NO GOOD DEED GOES UNPUNISHED It may seem like a double-edged sword, but to the extent a company aspires to leadership on significant social policy issues and embeds tenets related to these issues in its corporate policies or its way of doing business, it appears less likely that it will be able to convince the SEC staff that such an issue is not significantly related to its business. There are two noteworthy no-action letters from the 2018 season that illustrate this point. Apple submitted a no-action letter relating to a proposal recommending that it establish a human rights committee to review, assess, disclose and make recommendations to enhance the company's policies and practices on human rights. 6 Clearly not wanting to diminish a policy issue that Apple considers, and demonstrates in its way of doing business, as vitally important, Apple made the clever argument that human rights do not simply transcend ordinary business, but are an "integral component of the company's business operations," noting "the observance of human rights standards factors into every decision made by management in the day- to-day operations of the Company." Despite a thorough discussion of the Apple board's process and conclusions, the SEC staff rejected the request, referencing Apple's own language in its response letter to indicate that human rights transcend ordinary business. In another example, JPMorgan submitted a no-action letter relating to a proposal requesting that the board provide a report to shareholders on how its published corporate values align with its policies regarding investments in companies tied to genocide or crimes against humanity and specifically explain how a particular investment is consistent with its published corporate values. 7 The proponent cited numerous JPMorgan policies and value statements in opposing the no-action letter. Despite compelling arguments about micro-management and day-to- day business operations, the SEC staff rejected the request. While the SEC staff's response letter is not specific, it seems likely that it felt that JPMorgan's arguments about the significance of the proposal were undermined by its own public statements. 6 Apple Inc., SEC No-Action Letter (Dec. 21, 2017) (incoming letter Nov. 20, 2017). 7 JPMorgan Chase & Co. SEC No-Action Letter (Mar. 29, 2018). One of the lessons from the (i)(7) letters seems to be that world class companies have world class issues