Corporate Governance

Shearman & Sterling AMENDMENTS To date, 36 companies have amended their proxy access by-laws, 17 of which have made amendments since the 2016 proxy season. While some amendments have been made ahead of an upcoming vote on an "adopt" or "fix-it" proposal and some have been made in response to proposals that have passed, it is likely that at least a few amendments have been made in response to internal pressure from institutional shareholders seeking more favorable terms. EXCLUSIONS AND WITHDRAWALS The increase in "fix-it" proposals was offset by the SEC's decision earlier this year to generally allow companies to exclude shareholder cap proposals requesting an increase to 40 or 50 shareholders under Rule 14a-8(i)(10), so long as the company's proxy access by-law already had an aggregation cap of 20 shareholders and the company could represent to certain facts about its shareholder base. A total of 33 shareholder cap "fix-it" proposals were excluded in this fashion, although a number of companies were only able to obtain a favorable decision upon submission for reconsideration after the SEC initially denied their request. Regarding "adopt" proposals, the SEC continued to permit exclusion of these proposals under Rule 14a-8(i)(10) so long as the company had adopted proxy access with headline terms of 3 / 3 / 20 / 20 or with terms more favorable to shareholders. Despite the SEC's generally permissive stance with regard to exclusion of shareholder cap proposals, a recent no-action letter may be a harbinger of things to come for the 2018 proxy season. On July 21, 2017, H&R Block was denied no-action relief in attempting to exclude a shareholder proposal of John Chevedden seeking to eliminate H&R Block's shareholder cap of 20. The SEC may view a shareholder cap proposal seeking elimination of the shareholder cap as fundamentally different from a proposal requesting an increase in the shareholder cap from 20 to 40 or 50. This, combined with the SEC's earlier inconsistency in granting no-action relief to shareholder cap proposals with a finite cap, suggests that the SEC may not have a definitive approach in deciding on these proposals. We note that on September 14, 2017, the H&R Block shareholder cap "fix-it" proposal was defeated with 67% of shareholders voting against this proposal. FAST FACTS TIME FROM ADOPTION TO AMENDMENT companies that have amended their proxy access by-laws, there was an average of 305 36 days between the initial adoption of the by-law and an amendment. Among the More than annual meetings have been held by companies with a proxy access by-law since 2011. No proxy access candidates have appeared in a company proxy statement to date. 500 Only nomination has been attempted (and was disqualified by the company in question). 1 Proxy Access | 23

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