Shareholder Proposals Relating to the Election of Directors, 43488-43496 [E7-14955]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 72, Number 149 (Friday, August 3, 2007)]
[Proposed Rules]
[Pages 43488-43496]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-14955]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 240

[Release No. 34-56161; IC-27914; File No. S7-17-07]
RIN 3235-AJ95


Shareholder Proposals Relating to the Election of Directors

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rule.

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SUMMARY: The Securities and Exchange Commission is publishing this

[[Page 43489]]

interpretive and proposing release to clarify the meaning of the 
exclusion for shareholder proposals related to the election of 
directors that is contained in Rule 14a-8(i)(8) under the Securities 
Exchange Act of 1934. Rule 14a-8 is the Commission rule that provides 
shareholders with an opportunity to place a proposal in a company's 
proxy materials for a vote at an annual or special meeting of 
shareholders. The Commission is publishing its interpretation of and 
proposing amendments to Rule 14a-8(i)(8) to provide certainty regarding 
the meaning of the exclusion in that Rule.

DATES: Comments should be received by October 2, 2007.

ADDRESSES: Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (https://
www.sec.gov/rules/proposed.shtml);
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number S7-17-07 on the subject line; or
     Use the Federal Rulemaking Portal (https://
www.regulations.gov). Follow the instructions for submitting comments.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, U.S. Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number S7-17-07. This file number 
should be included on the subject line if e-mail is used. To help us 
process and review your comments more efficiently, please use only one 
method. The Commission will post all comments on the Commission's 
Internet Web site (https://www.sec.gov/rules/proposed.shtml). Comments 
also are available for public inspection and copying in the 
Commission's Public Reference Room, 100 F Street, NE., Washington, DC 
20549, on official business days between the hours of 10 a.m. and 3 
p.m. All comments received will be posted without change; we do not 
edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly.

FOR FURTHER INFORMATION CONTACT: Lillian Brown, Steven Hearne, or 
Tamara Brightwell, at (202) 551-3700, in the Division of Corporation 
Finance, U.S. Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-3010.

SUPPLEMENTARY INFORMATION: We are publishing our interpretation of Rule 
14a-8(i)(8) \1\ under the Securities Exchange Act of 1934.\2\ We also 
are proposing amendments to Rule 14a-8(i)(8).
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    \1\ 17 CFR 240.14a-8(i)(8).
    \2\ 15 U.S.C. 78a et seq.
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I. Overview

A. Federal Regulation of the Proxy Process

    Regulation of the proxy process is a core function of the 
Commission and is one of the original responsibilities that Congress 
assigned to the agency in 1934. Section 14(a) of the Exchange Act \3\ 
stemmed from a Congressional belief that ``fair corporate suffrage is 
an important right that should attach to every equity security bought 
on a public exchange.'' \4\ The Congressional committees recommending 
passage of Section 14(a) proposed that ``the solicitation and issuance 
of proxies be left to regulation by the Commission.'' \5\ Congress 
intended that Section 14(a) give the Commission the ``power to control 
the conditions under which proxies may be solicited'' \6\ and that this 
power would be exercised ``as necessary or appropriate in the public 
interest or for the protection of investors.'' \7\ Because the 
Commission's authority under Section 14(a) encompasses both disclosure 
and proxy mechanics,\8\ the proxy rules have long governed not only the 
information required to be disclosed to ensure that shareholders 
receive full disclosure of all information that is material to the 
exercise of their voting rights under state law and the corporation's 
charter, but also the procedure for soliciting proxies.\9\
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    \3\ 15 U.S.C. 78n(a).
    \4\ Mills v. Electric Auto-Lite Co., 396 U.S. 375, 381 (1970), 
quoting H.R. Rep. No. 1383, 73d Cong., 2d Sess., at 13 (1934). See 
also J. I. Case Co. v. Borak, 377 U.S. 426, 431 (1964).
    \5\ S. Rep. No. 792, 73d Cong., 2d Sess., at 12 (1934).
    \6\ H.R. Rep. No. 1383, 73d Cong., 2d Sess., at 14 (1934). The 
same report demonstrated a congressional intent to prevent 
frustration of the ``free exercise of the voting rights of 
stockholders.'' Id.
    \7\ 15 U.S.C. 78n(a).
    \8\ See Business Roundtable v. SEC, 905 F.2d 406, 411 (D.C. Cir. 
1990) (``We do not mean to be taken as saying that disclosure is 
necessarily the sole subject of Sec.  14''); Roosevelt v. E.I. du 
Pont de Nemours & Co., 958 F.2d 416, 421-22 (D.C. Cir. 1992) 
(Congress ``did not narrowly train section 14(a) on the interest of 
stockholders in receiving information necessary to the intelligent 
exercise of their'' state law rights); SEC v. Transamerica Corp., 
163 F.2d 511, 518 (3d Cir. 1947) (in which the Commission's 
authority to promulgate Exchange Act Rule 14a-8 was upheld), cert. 
denied, 332 U.S. 847 (1948). See also John C. Coffee Jr., Federalism 
and the SEC's Proxy Proposals, New York Law Journal 5 (March 18, 
2004) (Section 14(a) ``does not focus exclusively on disclosure; 
rather, it contemplates SEC rules regulating procedure in order to 
grant shareholders a `fair' right of corporate suffrage''); Louis 
Loss & Joel Seligman, Securities Regulation 1936-37 (3d ed. 1990) 
(The Commission's ``power under Sec.  14(a) is not necessarily 
limited to ensuring full disclosure. The statutory language is 
considerably more general than it is under the specific disclosure 
philosophy of the [Securities Act of 1933].'')
    \9\ E.g., Exchange Act Rule 14a-4 (17 CFR 240.14a-4), Exchange 
Act Rule 14a-7 (17 CFR 240.14a-7), and Exchange Act Rule 14a-8 (17 
CFR 240.14a-8). Each specifies procedural requirements that 
companies must observe in soliciting proxies. Exchange Act Rule 14a-
4(b)(2) requires that the form of proxy furnish the security holder 
with the means to withhold approval for the election of a director. 
Exchange Act Rule 14a-7 provides a procedure under which a security 
holder may be able to obtain a list of security holders. Exchange 
Rule 14a-8 provides a procedure under which a qualifying security 
holder can obligate the company to include certain types of 
proposals, along with statements in support of those proposals, in 
the company's proxy statement.
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B. Exchange Act Disclosure Requirements for Contested Elections

    Several Commission rules, including Exchange Act Rule 14a-12,\10\ 
regulate contested proxy solicitations to assure that investors receive 
adequate disclosure to enable them to make informed voting decisions in 
elections. The requirements to provide these disclosures to 
shareholders from whom proxy authority is sought are grounded in Rule 
14a-3,\11\ which requires that any party conducting a proxy 
solicitation file with the Commission, and furnish to each person 
solicited, a proxy statement containing the information in Schedule 
14A.\12\ Items 4(b) and 5(b) of Schedule 14A require numerous specified 
disclosures if the solicitation is subject to Rule 14a-12(c). A 
solicitation is subject to Rule 14a-12(c) if it is made ``for the 
purpose of opposing'' a solicitation by any other person ``with respect 
to the election or removal of directors. * * * '' \13\ Thus, the result 
of Schedule 14A's cross-referencing of Rule 14a-12(c) is to trigger, 
when a solicitation with respect to the election of directors is 
conducted in opposition to another solicitation, a number of 
disclosures relevant in proxy contests, including disclosure of: \14\
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    \10\ 17 CFR 240.14a-12.
    \11\ 17 CFR 240.14a-3.
    \12\ Rule 14a-3 provides, in pertinent part, that ``[n]o 
solicitation subject to this regulation shall be made unless each 
person solicited is concurrently furnished or has previously been 
furnished with a publicly-filed preliminary or definitive written 
proxy statement containing the information specified in Schedule 
14A. * * *''
    \13\ Because numerous protections of the federal proxy rules are 
triggered only by the presence of a solicitation made in opposition 
to another solicitation, the requirements regarding disclosures and 
procedures in contested elections do not contemplate the presence of 
nominees from different vying factions in the same proxy materials.
    \14\ See 17 CFR 240.14a-101, Items 4(b) and 5(b).

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[[Page 43490]]

     By whom the solicitation is made;
     The methods to be employed to solicit;
     Total expenditures to date and anticipated in connection 
with the solicitation;
     By whom the cost of the solicitation will be borne;
     Any substantial interest of each participant in the 
solicitation;
     The name, address, and principal occupation or principal 
business of each participant;
     Whether any participant has been convicted in a criminal 
proceeding within the past 10 years;
     The amount of each class of securities of the company 
owned by the participant and the participant's associates;
     Information concerning purchases and sales of the 
company's securities by each participant within the past two years;
     Whether any part of the purchase price or market value of 
such securities is represented by funds borrowed;
     Whether a participant is a party to any contract, 
arrangements or understandings with any person with respect to 
securities of the company;
     Certain related party transactions between the participant 
or its associates and the company;
     Whether the participant or any of its associates have any 
arrangement or understanding with any person with respect to any future 
employment with the company or its affiliates, or with respect to any 
future transactions to which the company or its affiliates will or may 
be a party; and
     With respect to any person who is a party to an 
arrangement or understanding pursuant to which a nominee is proposed to 
be elected, any substantial interest that such person has in any matter 
to be acted upon at the meeting.\15\
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    \15\ For purposes of Items 4 and 5, a ``participant'' in the 
solicitation includes: (i) Any person who solicits proxies; (ii) any 
director nominee for whose election proxies are being solicited; and 
(iii) any committee or group, any member of a committee or group, 
and other persons involved in specified ways in the financing of the 
solicitation. See Item 4, Instruction 3. Thus, for each of the 
numerous disclosures required as to a ``participant,'' the 
information must be disclosed as to all of such persons.

In addition, Item 7 of Schedule 14A requires the furnishing of 
additional information as to nominees for director, including nominees 
of ``persons other than the [company]'' (e.g., shareholders), 
including: \16\
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    \16\ See 17 CFR 240.14a-101, Item 7. See also 17 CFR 240.14a-
101, Item 22(b).
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     Any arrangement or understanding between the nominee and 
any other person(s) (naming such person(s)) pursuant to which the 
nominee was or is selected as a nominee; \17\
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    \17\ See Item 401(a) of Regulation S-K [17 CFR 229.401(a)], 
which is referenced in Item 7 of Schedule 14A.
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     Business experience of the nominee; \18\
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    \18\ See Item 401(e)(1) of Regulation S-K [17 CFR 
229.401(e)(1)], which is referenced in Item 7 of Schedule 14A.
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     Any other directorships held by the nominee in an Exchange 
Act reporting company; \19\
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    \19\ See Item 401(e)(2) of Regulation S-K [17 CFR 
229.401(e)(2)], which is referenced in Item 7 of Schedule 14A.
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     The nominee's involvement in certain legal proceedings; 
\20\
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    \20\ See Items 103 and 401(f) of Regulation S-K [17 CFR 229.103 
and 17 CFR 229.401(f)], which are referenced in Item 7 of Schedule 
14A.
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     Certain transactions between the nominee and the company; 
\21\ and
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    \21\ See Item 404 of Regulation S-K [17 CFR 229.404], which is 
referenced in Item 7 of Schedule 14A.
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     Whether the nominee complies with independence 
requirements.\22\
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    \22\ See Item 407(a) of Regulation S-K [17 CFR 229.407(a)], 
which is referenced in Item 7 of Schedule 14A.

Finally, and of critical importance, all of these disclosures are 
covered by the prohibition on the making of a solicitation containing 
false or misleading statements or omissions that is found in Rule 14a-
9.\23\
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    \23\ See 17 CFR 240.14a-9.
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C. The Shareholder Proposal Process

    Rule 14a-8 creates a procedure under which shareholders, subject to 
certain requirements, may present in the company's proxy materials a 
broad range of binding and non-binding proposals. The rule permits a 
shareholder owning a relatively small amount of the company's shares 
\24\ to submit his or her proposal to the company, and requires the 
company to include the proposal alongside management's proposals in the 
company's proxy materials. In all cases, the proposal may be excluded 
by the company if it fails to satisfy the rule's procedural 
requirements or falls within one of the rule's thirteen substantive 
categories of proposals that may be excluded.\25\
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    \24\ Exchange Act Rule 14a-8(b)(1) (17 CFR 240.14a-8(b)(1)) 
provides that a holder of at least $2,000 in market value, or 1% of 
the company's securities entitled to be voted, may submit a 
shareholder proposal subject to other procedural requirements and 
substantive bases for exclusion under the rule.
    \25\ With respect to subjects and procedures for shareholder 
votes that are specified by the corporation's governing documents, 
most state corporation laws provide that a corporation's charter or 
bylaws can specify the types of proposals that are permitted to be 
brought before the shareholders for a vote at an annual or special 
meeting. Rule 14a-8(i)(1) supports these determinations by providing 
that a proposal that is violative of the corporation's governing 
documents may be excluded from the corporation's proxy materials.
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    Rule 14a-8 specifies that companies must notify the Commission when 
they intend to exclude a shareholder's proposal from their proxy 
materials. This notice goes to the staff of the Division of Corporation 
Finance or the Division of Investment Management. In the notice, the 
company provides the staff with a discussion of the basis or bases upon 
which the company intends to exclude the proposal and requests that the 
staff not recommend enforcement action if the company excludes the 
proposal. A shareholder proponent may respond to the company's notice, 
but is not required to do so. Generally, the staff responds to each 
notice with a ``no-action'' letter to the company, a copy of which is 
provided to the shareholder, in which the staff either concurs or 
declines to concur with the company's view that there is a basis for 
excluding the proposal.\26\
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    \26\ The staff's response is an informal expression of its 
views, and does not necessarily reflect the view of the Commission. 
Either the shareholder proponent or the company may obtain a 
decision on the excludability of a challenged proposal from a 
federal court.
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II. The Election Exclusion in Rule 14a-8(i)(8)

A. Introduction

    Rule 14a-8(i)(8) sets forth one of several substantive bases upon 
which a company may exclude a shareholder proposal from its proxy 
materials. Specifically, it provides that a company need not include a 
proposal that ``relates to an election for membership on the company's 
board of directors or analogous governing body.'' The purpose of this 
provision is to prevent the circumvention of other proxy rules that are 
carefully crafted to ensure that investors receive adequate disclosure 
and an opportunity to make informed voting decisions in election 
contests.
    In administering Rule 14a-8(i)(8), the staff has applied the 
following explanation of the election exclusion that the Commission 
gave in 1976 when it proposed the exclusion:

    [T]he principal purpose of [Rule 14a-8(i)(8)] is to make clear, 
with respect to corporate elections, that Rule 14a-8 is not the 
proper means for conducting campaigns or effecting reforms in 
elections of that nature, since other proxy rules, including Rule 
14a-11, are applicable thereto.\27\
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    \27\ Exchange Act Release No. 34-12598 (July 7, 1976) [41 FR 
29982].

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[[Page 43491]]

    In its application of the Commission's explanation, the staff 
has permitted companies to exclude any shareholder proposal that may 
result in a contested election. For purposes of Rule 14a-8, the 
staff has expressed the position that a proposal may result in a 
contested election if it is a means either to campaign for or 
against a director nominee or to require a company to include 
shareholder-nominated candidates in the company's proxy materials. 
The staff's position is consistent with the explanation that the 
Commission gave in 1976, and with the Commission's interpretation of 
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the election exclusion.

    A recent decision by the U.S. Court of Appeals for the Second 
Circuit in American Federation of State, County & Municipal Employees, 
Employees Pension Plan v. American International Group, Inc.,\28\ 
addressed the application of the election exclusion. In that decision, 
the Second Circuit held that AIG could not rely on Rule 14a-8(i)(8) to 
exclude a shareholder proposal seeking to amend a company's bylaws to 
establish a procedure under which a company would be required, in 
specified circumstances, to include shareholder nominees for director 
in the company's proxy materials. The Second Circuit interpreted the 
Commission's statement in 1976 as limiting the election exclusion ``to 
shareholder proposals used to oppose solicitations dealing with an 
identified board seat in an upcoming election and reject[ing] the 
somewhat broader interpretation that the election exclusion applies to 
shareholder proposals that would institute procedures making such 
election contests more likely.'' \29\ It is the Commission's position 
that the election exclusion should not be limited in this way.\30\
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    \28\ American Federation of State, County & Municipal Employees, 
Employees Pension Plan v. American International Group, Inc., 462 
F.3d 121 (2d Cir. 2006) (AFSCME v. AIG).
    \29\ Id. at 128.
    \30\ In this regard, we note that the Second Circuit noted in 
its decision that ``* * * if the SEC determines that the 
interpretation of the election exclusion embodied in its 1976 
Statement would result in a decrease in necessary disclosures or any 
other undesirable outcome, it can certainly change its 
interpretation of the election exclusion, provided that it explains 
its reasons for doing so.'' Id. at 130.
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    We are concerned that the Second Circuit's decision has resulted in 
uncertainty and confusion with respect to the appropriate application 
of Rule 14a-8(i)(8) and may lead to contested elections for directors 
without adequate disclosure. In this regard, not only are shareholders 
and companies unable to know with certainty whether a proposal that 
could result in an election contest may be excluded under Rule 14a-
8(i)(8), but the staff also is severely limited in their ability to 
interpret Rule 14a-8 in responding to companies' notices of intent to 
exclude shareholder proposals. Therefore, to eliminate any uncertainty 
and confusion arising from the Second Circuit's decision, we are 
issuing this release to confirm the Commission's position that 
shareholder proposals that could result in an election contest may be 
excluded under Rule 14a-8(i)(8). We also are soliciting comment as to 
whether we should adopt proposed changes to Rule 14a-8(i)(8) to further 
clarify the rule's application. If clarification of the text of Rule 
14a-8(i)(8) would be helpful, we are seeking input as to whether the 
text of the proposed amendment provides adequate clarity.

B. The Purpose of the Election Exclusion

    The proper functioning of the election exclusion is critical to 
prevent the circumvention of other proxy rules that are carefully 
crafted to ensure that investors receive adequate disclosure in 
election contests. Because the board of directors of a company most 
often will include its own director nominees in its proxy materials, 
allowing shareholders to include their nominees in company proxy 
materials would create what is, in fact, a contested election of 
directors, without the shareholders conducting a separate proxy 
solicitation.
    The detailed and carefully crafted regulatory regime governing 
contested elections does not contemplate the presence of nominees from 
different vying factions in the same proxy materials. As explained 
above, numerous protections of the federal proxy rules are triggered 
only by the presence of a solicitation made in opposition to another 
solicitation. Accordingly, were the election exclusion to be applied as 
contemplated in the Second Circuit's decision in AFSCME v. AIG, it 
would be possible for a person to wage an election contest without 
conducting a separate proxy solicitation, and thus without providing 
the disclosures required by the Commission's present rules governing 
such contests, and potentially without liability under Rule 14a-9 for 
misrepresentations made by that person in its proxy solicitations. Such 
a result would be inconsistent with the Commission's 1976 statement 
regarding Rule 14a-8(i)(8) and the staff's application of that 
statement in responding to Rule 14a-8 notices of companies' intent to 
exclude proposals.

C. Application of the Election Exclusion Since 1976

    Since the Commission made its original statement regarding the 
intended purpose of the election exclusion in 1976, the Commission has 
made few statements regarding the exclusion, instead leaving 
application of the exclusion to the staff to implement in accordance 
with its stated intent at adoption. When the Commission has had 
occasion to comment on the exclusion or to review staff positions in 
applying the exclusion, however, it has done so in a manner that is 
consistent with its longstanding view of the exclusion's purpose.
    The Division issued a series of letters in 1990 that addressed 
nomination proposals similar to that presented in the AFSCME v. AIG 
matter. In those letters, the Division set forth its framework for 
applying Rule 14a-8(i)(8) to nomination proposals:

    There appears to be some basis for [the company's] view that the 
proposal may be omitted pursuant to rule 14a-8[(i)](8). That 
provision allows the omission of a proposal that ``relates to an 
election to office.'' In this regard, the staff particularly notes 
that the Commission has indicated that the ``principal purposes of 
[rule 14a-8(i)(8)] is to make clear [that] with respect to corporate 
elections, that [r]ule 14a-8 is not the proper means for conducting 
campaigns * * * since other proxy rules, including rule [14a-12] are 
applicable thereto.'' Securities Exchange Act Release No. 12598 
(July 7, 1976). Insofar as it seeks to implement a common ballot 
procedure, it appears that this proposal * * * would establish a 
procedure that may result in contested elections to the board which 
is a matter more appropriately addressed under Rule 14a-12. 
Accordingly, this Division will not recommend enforcement action to 
the Commission if the Company excludes the proposal from its proxy 
materials.\31\
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    \31\ See Division letter to Amoco (Feb. 14, 1990).

    In 1992, in proposing reforms to the proxy rules, the Commission 
acknowledged the ``difficulty experienced by shareholders in gaining a 
voice in determining the composition of the board of directors'' but 
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noted further that:

    Proposals to require the company to include shareholder nominees 
in the company's proxy statement [rather than in the dissident's own 
proxy statement] would represent a substantial change in the 
Commission's proxy rules. This would essentially mandate a universal 
ballot including both management nominees and independent candidates 
for board seats.\32\ (emphasis added).
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    \32\ See Exchange Act Release No. 34-31326 (Oct. 16, 1992) [57 
FR 48276].

    The Division continued to include the ``may result in contested 
elections'' language in its letters regarding shareholder nomination 
proposals and Rule 14a-8(i)(8) for 10 years.\33\ In 1998,

[[Page 43492]]

the Division included this language in its letter to Storage Technology 
Corporation.\34\ In that letter, the Division agreed that there was a 
basis for the company's view that it could exclude, under Rule 14a-
8(i)(8), a proposal that sought to amend the company's governing 
instruments to provide that any three shareholders who owned a combined 
minimum of 3,000 shares could include a director nominee in the 
company's proxy materials.\35\ The shareholder sought Commission review 
of this Division position, but the Commission declined to review the 
no-action determination.\36\
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    \33\ In each of 1993 and 1995, the Division issued one letter 
that took a view that was counter to existing precedent and its own 
statements with regard to similar proposals. See Dravo Corp. (Feb. 
21, 1995); and Pinnacle West Capital Corp. (Mar. 26, 1993) (not 
permitting exclusion under Rule 14a-8(i)(8) of proposals seeking to 
include qualified nominees in the company's proxy statement). The 
staff issued these letters in error, as they clearly are 
inconsistent with the Commission statement in the 1976 release 
proposing Rule 14a-8(i)(8) and numerous Division statements before 
and after. Further, these letters are inconsistent with later 
Commission statements, as described below.
    \34\ See Division letter to Storage Technology Corporation (Mar. 
11, 1998) (``There appears to be some basis for your view that the 
first proposal may be omitted under rule 14a-8[(i)](8). It appears 
that the first proposal, rather than establishing procedures for 
nomination or qualification generally, would establish a procedure 
that may result in contested elections of directors, which is a 
matter more appropriately addressed under Rule [14a-12]. 
Accordingly, the Division will not recommend enforcement action to 
the Commission if the Company excludes the first proposal from its 
proxy materials in reliance upon Rule 14a-8[(i)](8)'').
    \35\ See id.
    \36\ Letter of Jonathan Katz, Secretary of the Commission, to 
Dr. Seymour Licht P.E. (Apr. 6, 1998).
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    As noted above, the Division continued to include the ``contested 
elections'' language in its Rule 14a-8(i)(8) no-action letters through 
and beyond the Commission's 1998 letter to Storage Technology 
Corporation. While the Division has continued to follow this analysis 
in past seasons, it ceased repeating this language in its letters 
during the 2000 proxy season, as the analysis had been established 
definitively through 10 years of Division positions and the 
Commission's letter to Storage Technology.
    In 2003, the Division agreed that there was a basis for the view of 
Citigroup Inc. that it could exclude, under Rule 14a-8(i)(8), a 
proposal that was substantially similar to the proposal that was 
submitted to AIG by AFSCME and that was the subject of the Second 
Circuit's recent opinion. In its letter to Citigroup Inc. (Jan. 31, 
2003), the Division agreed that there was a basis for the Citigroup's 
view that the company could exclude a proposal because the proposal, 
``rather than establishing procedures for nomination or qualification 
generally, would establish a procedure that may result in contested 
elections of directors.'' The shareholder proposal at issue in 
Citigroup was submitted by AFSCME and, similar to the proposal 
submitted to AIG, would have amended the company's bylaws to require 
the company to include the name, along with certain disclosures and 
statements, of any person nominated for election to the board by a 3% 
or greater stockholder.
    The shareholder sought Commission review of the Division's position 
in its 2003 letter to Citigroup. The Commission declined to review the 
staff's determination, stating:

    [t]he Commission has determined not to review the Division's no-
action position under Rule 14a-8(i)(8). The Division's current no-
action position is consistent with Division positions taken in 
recent years. Any change in the Division's current interpretation 
would require other significant adjustments in the system of proxy 
regulation under Section 14(a) of the Securities Exchange Act of 
1934.\37\
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    \37\ See letter from Jonathan Katz, Secretary of the Commission, 
to Gerald W. McEntee (Apr. 14, 2003). In that letter, the Commission 
directed the Division to review the proxy rules and regulations, as 
well as the Division's interpretations, regarding procedures for the 
election of corporate directors. This review resulted in the 
Commission's proposal of revisions to the proxy rules in October 
2003.

    While the Commission determined not to review the staff's position, 
it directed the Division of Corporation Finance to review the proxy 
rules regarding procedures for the election of corporate directors and 
provide the Commission with recommendations regarding possible changes 
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to the proxy rules.

    Following the Division's review of the proxy rules, in 2003 the 
Commission proposed a comprehensive new set of rules, based on the 
Division's recommendations, which would govern shareholder director 
nominations that are not control-related.\38\ The Commission would not 
have taken such action had it believed that Rule 14a-8 provided an 
appropriate avenue for shareholder director nominations. In fact, in 
discussing alternatives considered but not chosen in proposing the 
rules, the Commission specifically noted the alternative of revising 
Rule 14a-8(i)(8) to enable shareholders to use the shareholder proposal 
rule to participate more fully in the director nomination process.\39\
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    \38\ Exchange Act Release No. 34-48626 (Oct. 14, 2003) [68 FR 
60784].
    \39\ Id. See also AFSCME at 130, n. 8 (stating that, because of 
the court's determination, ``there might very well be no reason for 
a rule based on Proposed Rule 14a-11 to co-exist with the procedure 
that our holding makes available to shareholders'').
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D. Commission Interpretation of Rule 14a-8(i)(8)

    As noted previously, the Commission stated clearly when it proposed 
amendments to Rule 14a-8 in 1976 that ``Rule 14a-8 is not the proper 
means for conducting campaigns or effecting reforms in elections of 
that nature, since other proxy rules, including Rule 14a-11, are 
applicable thereto.'' \40\ Thus, Rule 14a-8 expressly was not intended 
to be a substitute, or additional, mechanism for conducting contested 
elections (the type of elections that would involve the ``conducting 
[of] campaigns''), or for effecting reforms in contested elections 
(elections whose ``nature'' involves campaigns). Based on the 
foregoing, it is the Commission's view that a proposal may be excluded 
under Rule 14a-8(i)(8) if it would result in an immediate election 
contest (e.g., by making or opposing a director nomination for a 
particular meeting) or would set up a process for shareholders to 
conduct an election contest in the future by requiring the company to 
include shareholders' director nominees in the company's proxy 
materials for subsequent meetings.
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    \40\ Exchange Act Release No. 34-12598 (July 7, 1976). The 
Commission's reference in its 1976 statement to ``other proxy rules, 
including Rule 14a-11,'' reflects the fact that, in 1976, Rule 14a-
11 was the Commission proxy rule governing election contests. As 
part of a series of rule changes in 1999, the Commission rescinded 
Rule 14a-11 and moved many of the requirements of prior Rule 14a-11 
to the current Rule 14a-12. [17 CFR 240.14a-12] See Securities Act 
Release No. 33-7760 (Oct. 22, 1999) [64 FR 61408]. Accordingly, the 
Commission's reference to Rule 14a-11 in 1976 was to the rules 
governing election contests, which now may be found generally 
elsewhere in the proxy rules and, in particular, in Rule 14a-12.
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    In the AFSCME opinion, the Second Circuit agreed with the 
Commission's view that shareholder proposals can be excluded under Rule 
14a-8(i)(8) if they would result in an immediate election contest. The 
court, however, disagreed with the view that a proposal can be excluded 
under Rule 14a-8(i)(8) if it ``establish[es] a process for shareholders 
to wage a future election contest.''
    We believe that the fact a proposal relates to the process for 
future elections rather than an immediate election is not dispositive 
in determining whether the election exclusion applies to the proposal. 
As the Commission stated in 1976, the express purpose of the election 
exclusion is to make clear that Rule 14a-8 is not a proper ``means'' to 
achieve election contests because ``other proxy rules'' are applicable 
to such contests. The use of Rule 14a-8 to require companies to include 
proposals that would require election contests to be conducted without 
compliance with

[[Page 43493]]

the specific rules governing such contests would be contrary to the 
intent of the Commission's 1976 statement.
    For these reasons, and to avoid such circumvention, the phrase 
``relates to an election'' in the election exclusion cannot be read so 
narrowly as to refer only to a proposal that ``relates to the current 
election,'' or a particular election, but rather must be read to refer 
to a proposal that ``relates to an election'' in subsequent years as 
well. In this regard, if one looked only to what a proposal 
accomplished in the current year, and not to its effect in subsequent 
years, the purpose of the exclusion could be evaded easily. For 
example, such a reading might permit a company to exclude a shareholder 
proposal that nominated a candidate for election as director for the 
upcoming meeting of shareholders but not exclude a proposal that 
required the company to include the same shareholder-nominated 
candidate in the company's proxy materials for the following year's 
meeting.
    In implementing the Commission's intended meaning, the staff has 
taken care not to adopt an inappropriately broad reading of whether a 
proposal ``relates to an election,'' as such a reading would permit the 
exclusion of all proposals regarding the qualifications of directors, 
the composition of the board, shareholder voting procedures, and board 
nomination procedures. We agree with the staff's application of the 
exclusion in this regard, as an inappropriately broad reading of the 
exclusion would deny shareholder access to the company proxy materials 
under Rule 14a-8 with respect to a vast category of election matters of 
importance to shareholders that would not result in an election contest 
between management and shareholder nominees, and that do not present 
significant conflicts with the Commission's other proxy rules.\41\
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    \41\ In this regard, the staff has taken the position that a 
proposal relates to ``an election for membership on the company's 
board of directors or analogous governing body'' and, as such, may 
be excluded under Rule 14a-8(i)(8) if it could have the effect of, 
or proposes a procedure that could have the effect of, any of the 
following:
     Disqualifying board nominees who are standing for 
election;
     Removing a director from office before his or her term 
expired;
     Questioning the competence or business judgment of one 
or more directors; or
     Requiring companies to include shareholder nominees for 
director in the companies' proxy materials or otherwise resulting in 
a solicitation on behalf of shareholder nominees in opposition to 
management-chosen nominees.
    Conversely, the staff has taken the position that a proposal may 
not be excluded under Rule 14a-8(i)(8) if it relates to any of the 
following:
     Qualifications of directors or board structure (as long 
as the proposal will not remove current directors or not disqualify 
current nominees);
     Voting procedures (such as majority or cumulative 
voting);
     Nominating procedures; or
     Reimbursement of shareholder expenses in contested 
elections.
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    Our interpretation of the election exclusion is fully consistent 
with the Commission's statement in 1976, that the rule was not intended 
``to cover proposals dealing with matters previously not held not 
excludable by the Commission, such as cumulative voting rights, general 
qualifications for directors * * * '' In the AFSCME v. AIG opinion, the 
Second Circuit inferred from this Commission statement that the 
Commission ``reject[ed] the somewhat broader interpretation that the 
election exclusion applies to shareholder proposals that would 
institute procedures for making election contests more likely.'' Our 
view that Rule 14a-8(i)(8) allows companies to exclude shareholder 
proposals that could result in election contests without compliance 
with the contested election proxy rules is consistent with the 
Commission's statement in 1976. As explained above, the analysis under 
Rule 14a-8(i)(8) does not focus on whether the proposal would make 
election contests more likely, but whether the resulting contests would 
be governed by the Commission's proxy rules for contested elections. 
The Commission's references in 1976 to proposals relating to 
``cumulative voting rights'' and ``general qualifications for 
directors'' simply reflect the long-held belief that these proposals 
generally do not trigger the contested elections proxy rules and 
therefore are not excludable under Rule 14a-8(i)(8). Accordingly, the 
Commission's 1976 statement should not be interpreted to mean that Rule 
14a-8(i)(8) is inapplicable to proposals establishing procedures for 
elections generally.

III. Proposed Amendments to Rule 14a-8(i)(8)

    In addition to the guidance provided in this release regarding our 
interpretation of Rule 14a-8(i)(8), we are considering whether it would 
be appropriate to amend that rule to further clarify the meaning of its 
exclusion. The text of Rule 14a-8(i)(8) currently specifies only that a 
proposal may be excluded ``[i]f the proposal relates to an election for 
membership on the company's board of directors or analogous governing 
body.'' To clarify the meaning of the exclusion, consistent with the 
Commission's interpretation of that exclusion, we are proposing to 
revise the exclusion to read:

    If the proposal relates to a nomination or an election for 
membership on the company's board of directors or analogous 
governing body or a procedure for such nomination or election.

    We believe that the added references to ``nomination'' and 
``procedure'' in the rule text will reflect more appropriately the 
purpose of the election exclusion. Further, if adopted, we would 
indicate clearly that the term ``procedures'' referenced in the 
election exclusion relates to procedures that would result in a 
contested election, either in the year in which the proposal is 
submitted or in subsequent years, consistent with the Commission's 
interpretation of the exclusion.
    As discussed above, we are proposing amendments to Rule 14a-8 that 
would clarify the operation of the exclusion in Rule 14a-8(i)(8) in a 
manner that is consistent with the Commission's interpretation of that 
exclusion. With regard to this proposed amendment, we are soliciting 
comment as to the following:
     Would the proposed amendments to Rule 14a-8(i)(8) provide 
sufficient certainty regarding the scope of the exclusion? If not, what 
additional amendments are necessary?
     Should the exclusion specify those procedures that the 
staff historically has found to fall within the exclusion?
     What additional clarification would be helpful and/or 
appropriate?

For further clarity, should the proposed amendments include a specific 
reference to the interpretation of the exclusion with respect to 
procedures that could not result in a contested election? An example of 
such a further clarification would be:

    In this regard, a proposal relates to ``a nomination or an 
election for membership on the company's board of directors or 
analogous governing body or a procedure for such nomination or 
election'' if it could have the effect of, or proposes a procedure 
that could have the effect of, any of the following: (A) 
Disqualifying board nominees who are standing for election; (B) 
removing a director from office before his or her term expired; (C) 
questioning the competence or business judgment of one or more 
directors; or (D) requiring companies to include shareholder 
nominees for director in the companies' proxy materials or otherwise 
resulting in a solicitation on behalf of shareholder nominees in 
opposition to management-chosen nominees.

IV. General Request for Comment

    We request and encourage any interested person to submit comments 
regarding:

[[Page 43494]]

     The proposed amendments that are the subject of this 
release;
     Additional or different changes; or
     Other matters that may have an effect on the proposals 
contained in this release.
    We request comment from the point of view of companies, investors, 
and other market participants. With regard to any comments, we note 
that such comments are of great assistance to our rulemaking initiative 
if accompanied by supporting data and analysis of the issues addressed 
in those comments. We will consider all comments responsive to this 
inquiry in complying with our responsibilities under Section 23(a) of 
the Exchange Act.\42\
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    \42\ 15 U.S.C. 78w(a).
---------------------------------------------------------------------------

V. Paperwork Reduction Act

A. Background

    The proposed amendments affect ``collection of information'' 
requirements within the meaning of the Paperwork Reduction Act of 1995, 
the PRA.\43\ The title for the affected collection of information is 
``Proxy Statements--Regulation 14A (Commission Rules 14a-1 through 14a-
16 and Schedule 14A)'' (OMB Control No. 3235-0059). This regulation was 
adopted pursuant to the Exchange Act and sets forth the disclosure 
requirements for proxy statements filed by companies to help investors 
make informed voting decisions.
---------------------------------------------------------------------------

    \43\ 44 U.S.C. 3501 et seq.
---------------------------------------------------------------------------

    The hours and costs associated with preparing and filing the 
disclosure, filing the forms and schedules and retaining records 
required by these regulations constitute reporting and cost burdens 
imposed by each collection of information. An agency may not conduct or 
sponsor, and a person is not required to respond to, a collection of 
information unless it displays a currently valid OMB control number.

B. Summary of Proposals

    Rule 14a-8 is the Commission rule that provides shareholders with 
an opportunity to place a proposal in a company's proxy materials for a 
vote at an annual or special meeting of shareholders. The proposed 
amendments to that rule are intended to clarify the scope of the 
exclusion in Rule 14a-8(i)(8), consistent with the Commission's 
interpretation of the exclusion. The amendments would provide certainty 
regarding the meaning of the exclusion in that rule.

C. Paperwork Reduction Act Burden Estimates

    Adoption of the Rule 14a-8(i)(8) amendments would merely revise the 
text of the rule in a manner that is consistent with the Commission's 
interpretation of the rule. As such, the amendments proposed today 
would not change the information that companies are required to provide 
on Schedule 14A; the same information will be required if the proposed 
amendments are adopted.

D. Solicitation of Comments

    We request comment on this Paperwork Reduction Act Analysis. 
Pursuant to 44 U.S.C. 3506(c)(2)(B), the Commission solicits comments 
to:
     Evaluate whether the proposed collection of information is 
necessary for the proper performance of the functions of the agency, 
including whether the information will have practical utility;
     Evaluate the accuracy of the Commission's estimate of 
burden of the proposed collection of information;
     Determine whether there are ways to enhance the quality, 
utility, and clarity of the information to be collected; and
     Evaluate whether there are ways to minimize the burden of 
the collection of information on those who are to respond, including 
through the use of automated collection techniques or other forms of 
information technology.

Persons submitting comments on the collection of information 
requirements should direct the comments to the Office of Management and 
Budget, Attention: Desk Officer for the Securities and Exchange 
Commission, Office of Information and Regulatory Affairs, Washington, 
DC 20503, and should send a copy to Nancy M. Morris, Secretary, 
Securities and Exchange Commission, 100 F Street, NE., Washington, DC 
20549-1090, with reference to File No. S7-17-07. Requests for materials 
submitted to OMB by the Commission with regard to these collections of 
information should be in writing, refer to File No. S7-17-07, and be 
submitted to the Securities and Exchange Commission, Office of Investor 
Education and Assistance, Washington, DC 20549.

VI. Cost-Benefit Analysis

    We propose amendments that would clarify existing rules. The 
opinion in American Federation of State, County & Municipal Employees, 
Employees Pension Plan v. American International Group, Inc.\44\ has 
created uncertainty regarding the Commission staff's longstanding 
administration of Rule 14a-8(i)(8), making it difficult for 
shareholders and companies to assess the operation of that rule. The 
proposed amendments to that rule are intended to clarify the scope of 
the exclusion in Rule 14a-8(i)(8), consistent with the Commission's 
interpretation of the rule. Without such clarification, shareholders 
and companies may be uncertain as to the range of shareholder proposals 
that are required to be included in company proxy materials and may be 
uncertain as to the proper range of proposals that shareholders may 
submit to companies for inclusion in those proxy materials. For 
example, without clarification of the exclusion in Rule 14a-8(i)(8), 
shareholders may incur costs in preparing and submitting proposals that 
a company may properly exclude from its proxy materials.
---------------------------------------------------------------------------

    \44\ 462 F.3d 121 (2d Cir. 2006) (AFSCME).
---------------------------------------------------------------------------

    Because the proposed amendments would clarify that the scope of the 
exclusion in Rule 14a-8(i)(8) is consistent with the Commission's 
interpretation of that exclusion, shareholders and companies would not 
incur additional costs to determine the appropriate scope of that 
exclusion. Further, companies would not incur additional costs with 
regard to the inclusion of shareholder proposals in proxy materials.
    The proposed amendments should improve the ability of shareholders 
to prepare and submit proposals that will be required to be included in 
a company's proxy materials, as those shareholders will have a clear 
understanding of the scope of the Rule 14a-8(i)(8) exemption. Further, 
without the clarification of the proper scope of the Rule 14a-8(i)(8) 
exclusion that would be provided by the amendments, shareholders and 
companies may incur substantial expense in litigating disputes 
regarding that exclusion.
Request for Comment
    We are sensitive to the costs and benefits imposed by our rules. We 
have identified no costs and certain benefits related to these 
proposals. We request comment on all aspects of this cost-benefit 
analysis, including identification of any costs and additional 
benefits. We encourage commenters to identify and supply relevant data 
concerning the costs and benefits of the proposed amendments.

[[Page 43495]]

VII. Consideration of Burden on Competition and Promotion of 
Efficiency, Competition and Capital Formation

    Section 23(a)(2) of the Exchange Act \45\ requires us, when 
adopting rules under the Exchange Act, to consider the impact that any 
new rule would have on competition. In addition, Section 23(a)(2) 
prohibits us from adopting any rule that would impose a burden on 
competition not necessary or appropriate in furtherance of the purposes 
of the Exchange Act. Section 3(f) of the Exchange Act \46\ and Section 
2(c) of the Investment Company Act of 1940 \47\ requires us, when 
engaging in rulemaking that requires us to consider or determine 
whether an action is necessary or appropriate in the public interest, 
to consider, in addition to the protection of investors, whether the 
action will promote efficiency, competition and capital formation.
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    \45\ 15 U.S.C. 78w(a)(2).
    \46\ 15 U.S.C. 78c(f).
    \47\ 15 U.S.C. 80a-2(c).
---------------------------------------------------------------------------

    The AFSCME opinion has created uncertainty regarding the Commission 
staff's longstanding administration of Rule 14a-8(i)(8), making it 
difficult for companies and shareholders to assess the operation of 
that rule. This has resulted in uncertainty regarding whether Rule 14a-
8 requires companies to include in their proxy materials shareholder 
proposals that would establish procedures under which shareholder 
nominees for director, despite the exclusion provided by Rule 14a-
8(i)(8). This uncertainty has made it difficult for shareholders and 
companies to assess the proper operation of the shareholder proposal 
rule and has generated economic inefficiency by introducing potential 
litigation costs, and costs incurred to prepare and respond to 
shareholder proposals.
    The proposed amendments are intended to clarify the scope of the 
exclusion in Rule 14a-8(i)(8), consistent with the Commission's 
interpretation of the rule. This should improve shareholders' and 
companies' ability to assess shareholder proposals with a clear 
understanding whether Rule 14a-8 will require inclusion of the 
proposal. Informed decisions in this regard generally promote market 
efficiency and capital formation. We believe the proposed amendments to 
Rule 14a-8 would not impose a burden on competition.
    We request comment on whether the proposed amendments, if adopted, 
would impose a burden on competition. We also request comment on 
whether the proposed amendments, if adopted, would promote efficiency, 
competition and capital formation. Finally, we request commenters to 
provide empirical data and other factual support for their views if 
possible.

VIII. Initial Regulatory Flexibility Act Analysis

    This Initial Regulatory Flexibility Analysis has been prepared in 
accordance with 5 U.S.C. 603. It relates to proposed amendments to Rule 
14a-8 that would clarify the application of the exclusion provided by 
paragraph (i)(8) of that rule.

A. Reasons for, and Objectives of, Proposed Action

    The purpose of the proposed amendments is to clarify the 
requirements of companies to include in their proxy materials 
shareholder proposals relating to procedures for the inclusion of 
shareholder nominees for directors in company proxy materials. The 
proposed amendments would clarify the scope of Rule 14a-8(i)(8), which 
permits companies to omit certain such proposals from their proxy 
materials.
    The proposals, if adopted, should improve shareholders' and 
companies' ability to assess shareholder proposals with a clear 
understanding whether Rule 14a-8 will require inclusion of the 
proposal.

B. Legal Basis

    We are proposing amendments to the rules under the authority set 
forth in Sections 14 and 23(a) of the Exchange Act, as amended, and 
Sections 20(a) and 38 of the Investment Company Act of 1940, as 
amended.

C. Small Entities Subject to the Proposed Rules

    The Regulatory Flexibility Act defines ``small entity'' to mean 
``small business,'' ``small organization,'' or ``small governmental 
jurisdiction.'' \48\ The Commission's rules define ``small business'' 
and ``small organization'' for purposes of the Regulatory Flexibility 
Act for each of the types of entities regulated by the Commission.\49\ 
A ``small business'' and ``small organization,'' when used with 
reference to a company other than an investment company, generally 
means an company with total assets of $5 million or less on the last 
day of its most recent fiscal year. We estimate that there are 
approximately 1,100 companies, other than investment companies, that 
may be considered reporting small entities.\50\ The proposed rules may 
affect each of the approximately 1,315 small entities that are subject 
to the Exchange Act reporting requirements.
---------------------------------------------------------------------------

    \48\ 5 U.S.C. 601(6).
    \49\ Securities Act Rule 157 (17 CFR 230.157), Exchange Act Rule 
0-10 (17 CFR 240.0-10) and Investment Company Act Rule 0-10 (17 CFR 
270.0-10) contain the applicable definitions.
    \50\ The estimated number of reporting small entities is based 
on 2007 data, including the Commission's EDGAR database and Thomson 
Financial's Worldscope database. Approximately 215 investment 
companies meet this definition.
---------------------------------------------------------------------------

    We request comment on the number of small entities that would be 
impacted by our proposals, including any available empirical data.

D. Reporting, Recordkeeping and Other Compliance

Requirements
    The proposed amendments would impose no new reporting, 
recordkeeping, or compliance requirements. The impact of these 
proposals relates to clarifying the scope of the requirement to include 
shareholder proposals in company proxy materials.

E. Duplicative, Overlapping or Conflicting Federal Rules

    We believe that there are no rules that conflict with or duplicate 
the proposed rules.

F. Significant Alternatives

    The Regulatory Flexibility Act directs us to consider significant 
alternatives that would accomplish the stated objective of our 
proposals, while minimizing any significant adverse impact on small 
entities. In connection with the proposed amendments and rules, we 
considered the following alternatives:
     The existence or nature of the potential impact of the 
proposals on small entities discussed in the analysis; and
     How to quantify the impact of the proposed rules.
    Commenters are asked to describe the nature of any impact and 
provide empirical data supporting the extent of the impact. Such 
comments will be considered in the preparation of the final regulatory 
flexibility analysis, if the proposals are adopted, and will be placed 
in the same public file as comments on the proposed amendments 
themselves.

IX. Small Business Regulatory Enforcement Fairness Act

    For purposes of the Small Business Regulatory Enforcement Fairness 
Act of

[[Page 43496]]

1996,\51\ a rule is ``major'' if it has resulted, or is likely to 
result in:
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    \51\ Pub. L. No. 104-121, Title II, 110 Stat. 857 (1996) 
(codified in various sections of 50 U.S.C., 15 U.S.C. and as a note 
to 5 U.S.C. Sec.  601).
---------------------------------------------------------------------------

     An annual effect on the economy of $100 million or more;
     A major increase in costs or prices for consumers or 
individual industries; or
     Significant adverse effects on competition, investment or 
innovation.
    We request comment on whether our proposals would be a ``major 
rule'' for purposes of SBREFA. We solicit comment and empirical data 
on:
     The potential effect on the U.S. economy on an annual 
basis;
     Any potential increase in costs or prices for consumers or 
individual industries; and
     Any potential effect on competition, investment or 
innovation.

X. Statutory Basis and Text of Proposed Amendments

    We are proposing amendments to rules pursuant to Sections 14, and 
23(a) of the Exchange Act, as amended, and Sections 20(a) and 38 of the 
Investment Company Act of 1940, as amended.

List of Subjects in 17 CFR Part 240

    Reporting and recordkeeping requirements, Securities.

    In accordance with the foregoing, the Securities and Exchange 
Commission proposes to amend Title 17, chapter II of the Code of 
Federal Regulations as follows:

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 
1934

    1. The authority citation for part 24 continues to read, in part, 
as follows:

    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i, 
78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78o, 78p, 78q, 78s, 78u-5, 
78w, 78x, 78ll, 78mm, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4, 
80b-11, and 7201 et seq.; and 18 U.S.C. 1350, unless otherwise 
noted.
* * * * *
    2. Amend Sec.  240.14a-8 by revising paragraph (i)(8) to read as 
follows:


Sec.  240.14a-8  Shareholder proposals.

* * * * *
    (i) * * *
    (8) Relates to election: If the proposal relates to a nomination or 
an election for membership on the company's board of directors or 
analogous governing body or a procedure for such nomination or 
election;
* * * * *

    By the Commission.

    Dated: July 27, 2007.
Nancy M. Morris,
Secretary.
[FR Doc. E7-14955 Filed 8-2-07; 8:45 am]
BILLING CODE 8010-01-P