The "Common Practice" of Bundling: Fact or Fiction?


Julian Ellis* 


The federal proxy rules prohibit companies from “bundling” proposals submitted to shareholders. Adopted in 1992 by the Securities and Exchange Commission (Commission), the anti-bundling rules generated little attention or controversy for twenty-plus years. In early 2013, however, the rules re-surfaced in a major way in Greenlight Capital, L.P. v. Apple, Inc.[1] The case involved a dispute between a Wall Street darling and a prominent hedge fund manager. The court, applying the rules, enjoined Apple from moving forward with its bundled proposals. 

In the wake of Greenlight Capital, concern has arisen over the “common practice” of bundling proposals on proxy statements. These claims, however, remain unsubstantiated. While the practice does occur, no substantive research published by academics, or data provided by parties in litigation, has established that bundling is prevalent. Nonetheless, as the litigation in Greenlight Capital illustrates, the practice may not trigger adequate attention from the Commission. 

This Article proceeds in two Parts. Part I comprehensively details the adoption of the anti-bundling rules and the Commission’s administrative interpretation. Part I also includes a survey of the limited case law on the anti-bundling rules, particularly the two most prominent cases interpreting the rules—Koppel v. 4987 Corp.[2] and Greenlight Capital.

Part II first details the arguments by companies and shareholder groups concerning the frequency of bundling and the inferences to be drawn from that frequency. Part II then independently assesses the practice of bundling by detailing the findings of an empirical study. The study, along with other instances of bundling observed, paints a more complete picture of the realities of bundling. Part II concludes by suggesting that any response by the Commission should be minimally invasive and proportionally directed towards the most common sources of bundling violations. Additionally, the Commission’s efforts must continue to be supplemented by private actions to ensure an efficient allocation of enforcement resources.

I.          Background

A. Administrative History of Rules 14a-4(a)(3) and (b)(1)

Section 14(a) of the Securities Exchange Act of 1934 (Exchange Act) provided the Commission with broad authority to regulate the proxy process.[3] In doing so, Congress sought to “protect investors from . . . unscrupulous corporate officials seeking to retain control of the management . . . .”[4] Reflecting their importance, the first set of proxy rules were put in place only a year after the adoption of the Exchange Act.[5]

The Commission substantively amended the rules three-years later.[6] Unlike the original rules, the revised rules required a “proxy statement” that included detailed disclosure. In addition, the rules for the first time specifically regulated the contents of the proxy card. Shareholders were to be given “definite means” to indicate their vote[7] in legible font size.[8] The rules did not, however, require that each proposal be individually delineated. Instead, proposals could be grouped together as long as they were “related.”[9] The ability to “group” proposals remained in place until the adoption of the anti-bundling rules in 1992.    

1.              The Commission’s Adoption of the Anti-Bundling Rules

Beginning in 1989, the Commission commenced a two-year study of the proxy rules.[10] After receipt of more than 900 comment letters from individual and institutional shareholders, market participants, and state and federal legislators,[11] the Commission released a comprehensive set of amendments.[12] Among the proposed amendments was a revision to Rule 14a-4 that sought to require the unbundling of proposals on proxy statements. The proposed rules specified that the proxy statement must “identify clearly and impartially each separate matter intended to be acted upon.”[13]

The approach arose out of concern that grouping proposals could “caus[e] shareholders to approve matters they might not if presented independently.”[14] Moreover, the proposal would eliminate the “interpretative uncertainties” in determining whether matters were “related.”[15]

During the comment period, corporate observers expressed a number of concerns.[16] They asserted that the Commission was overstepping its authority and treading on areas traditionally governed by state law.[17] Others argued that grouping proposals had a legitimate purpose.[18] Commentators also noted that the Commission’s anti-bundling efforts could be circumvented through “conditional voting.”[19] Corporations could merely condition “the effectiveness of any proposal on the adoption of one or more other proposals.”[20]

The Commission adopted the anti-bundling rules as proposed.[21] Specific to the rules, the Commission viewed its efforts as consistent with § 14(a) of the Exchange Act’s purpose: To ensure that proxy voting was “conducted on a fair, honest and informed basis.”[22] More generally, the Commission believed that these revisions would “allow ‘market forces’ to restore a ‘better sense of balance to America’s [b]oardrooms’”[23] and would continue to facilitate the communication channels between shareholders and management.[24]

Although issuers could no longer bundle proposals, they could still engage in conditional voting.[25] The Commission, however, reminded companies of the need to advise shareholders “that a vote against one proposal may have the effect of a vote against the group of mutually-conditioned proposals.”[26]

2.  The Commission’s Interpretation of the Anti-Bundling Rules

The Commission has provided only modest guidance on the anti-bundling rules. The staff issued an interpretation in connection with “mergers, acquisitions, and similar transactions.”[27] In particular, the staff provided advice on changes to organizational documents that resulted from these transactions. Recognizing that amendments relating to “corporate governance-related and control-related provisions” could raise “complex issues,”[28] issuers were instructed to separate proposals when material.[29] Nonetheless, the Commission explained that the rules did not “affect the ability of contracting parties to condition completion of a transaction on shareholder approval of the separate proposals.”[30]   

The Commission also provided guidance with respect to amendments to an existing compensation plan.[31] Amendments did not have to be separated; instead, “it [wa]s appropriate to provide for a single vote on the plan, as amended, rather than a vote on each amendment in a given plan.”[32] Unlike the statement with respect to mergers, the Commission did not specifically limit the bundling in these circumstances to immaterial amendments.

In early 2014, the staff further clarified the general applicability of the anti-bundling rules.[33] Separate matters that were “‘inextricably intertwined’ as to effectively constitute a single matter” did not have to be unbundled.[34] Matters were not, however, “inextricably intertwined” just because they were derivative of a single transaction or bargain.[35] Moreover, the bundling of “immaterial”[36] matters was permissible.[37] Finally, the staff reinforced its previous guidance on incentive plans, noting that amendments need not be separated.[38] Additionally, the staff clarified that amendments to incentive plans may be bundled even if material.[39]

3.  No Action Letters: Anti-Bundling Rules as a Sword

In the context of shareholder proposals, companies attempted to transform the anti-bundling rules from a shareholder shield to a management sword.[40] In a number of instances, issuers characterized proposals as bundled and sought exclusion under Rule 14a-8.[41] For instance, in 2012, Medtronic, Inc. requested that the Commission concur in its decision to exclude a shareholder proposal to amend certain voting requirements.[42] The proposal sought to amend multiple provisions of the articles and bylaws to require only a simple majority vote.[43] Medtronic argued that the proposal failed to differentiate between the various provisions and, therefore, improperly bundled the provisions, preventing shareholders from voting on each individual provision.[44] 

This argument, however, proved largely ineffective. The proxy rules already limited shareholders to a single proposal.[45] This provided a basis for excluding any proposals that contained more than one resolution, rendering the anti-bundling prohibition moot. As a result, the Commission rejected Medtronic’s reliance on the anti-bundling rules.[46]

B. Instructive Cases Addressing the Anti-Bundling Rules

The anti-bundling rules have generated little controversy and limited case law since their adoption.[47] Only two cases have provided any meaningful interpretation of the requirements. Koppel established the existence of private right of actions for violations of the anti-bundling requirements. Greenlight Capital reaffirmed the importance of the rules as a shareholder-defense mechanism.

1.  Koppel v. 4987 Corp.: Recognition of a Private Right of Action

In Koppel v. 4987 Corp., the court clarified that a private right of action existed for violations of the anti-bundling rules.[48] Defendant-corporation solicited shareholder consent for four proposals.[49] Three dealt with the sale and distribution of proceeds from real-estate holdings and were bundled together in a single proposal, labeled “Sale Program.”[50] Plaintiffs filed suit alleging, among other things, that the combination violated the anti-bundling rules.[51] 

The district court found that plaintiffs could not maintain a private right of action and dismissed their claim.[52] The court reasoned that private right of actions under the proxy rules were only appropriate for violations that “implicate[d] the full disclosure concerns underlying Section 14(a).”[53] Violations of the anti-bundling rules did “not appear to rise to the level of warranting a new private cause of action.”[54]

The Second Circuit reversed.[55] Although the U.S. Supreme Court had never expressly extended private right of actions to the proxy rules, the circuit court reasoned that, consistent with other extensions of private actions by the Court, the matter depended upon congressional intent and offsetting policy concerns.[56] Congress adopted § 14(a) in part to secure “fair corporate suffrage” and control proxy solicitation to prevent abuses that “frustrate[] the free exercise of the voting rights of stockholders.”[57] Furthermore, a private action would not result in unreliable and protracted litigation.[58] Accordingly, the circuit court held a private right of action “comports generally with the congressional intent . . . and does not raise the policy concerns that motivated the Court to decline to extend a private right of action.”[59]

2.  Greenlight Capital, L.P. v. Apple, Inc.: Anti-Bundling Rules Re-surface

The anti-bundling rules received their most extensive judicial consideration in Greenlight Capital, L.P. v. Apple, Inc.[60] Apple sought four changes to its Articles of Incorporation and combined them in a single proposal.[61] Proposal No. 2 provided:

Amendment of Apple’s Restated Articles of Incorporation to (i) eliminate certain language relating to the term of office of directors in order to facilitate the adoption of majority voting for the election of directors, (ii) eliminate “blank check” preferred stock, (iii) establish a par value for the Company’s common stock of $0.00001 per share and (iv) make other conforming changes as described in more detail in Apple’s Proxy Statements.[62]

Greenlight Capital contended that the combining of the amendments into one voting proposal violated the anti-bundling rules and sought injunctive relief.[63]

Apple opposed the effort and set forth multiple justifications for its bundling.[64] The court rejected each and granted the injunction sought by Greenlight Capital. First, it was “irrelevant that Proposal No. 2 [was] limited to amending the [a]rticles.”[65] The proposal presented multiple items for voting; therefore, unless ministerial or technical, shareholders must be permitted to vote on each.[66] Second, Apple’s proffered instances of other companies’ bundling were “of no moment as none of the proxy statements cited by Apple have been held to comply with SEC rules.”[67] Third, as for inaction by the Commission, even if the Commission’s “silence should be accorded ‘some weight,’” courts must still “exercise [their] independent judgment” as to whether the Commission’s rules have been complied with.[68] Since Koppel, the Commission had acknowledged and embraced private right of actions as a means to supplement its efforts.[69]

Fourth, Apple’s amendments were not ministerial or immaterial. The “very existence of th[e] action” suggested the provisions were “indeed material.”[70] Finally, the characterization of the amendments as pro-shareholder “misapprehend[ed] the rules.”[71] As the court clarified, “Apple’s view, sincere or not, that Proposal No. 2 [was] ‘pro[-]shareholder’ ha[d] absolutely no bearing on the Court’s analysis of the SEC’s ‘unbundling’ rules.”[72]  

Apple voluntarily withdrew Proposal No. 2 from consideration at its annual meeting.[73] Subsequently, Greenlight Capital voluntarily dismissed its case.[74]

II.         Analysis

A. Bundling as a Common Practice

Companies and shareholder groups alike have claimed that bundling is a common practice.[75] The inferences these two groups would have courts and the Commission draw from the asserted frequency, however, could not be any further apart.

In Greenlight Capital, Apple advised the court that bundling was common, specifically with respect to charter amendments.[76] There were “numerous examples of permitted proposals that combined multiple charter changes into single proposals.”[77] Apple even went as far as to say that the bundling of charter amendments was an “established practice.”[78] For authority, Apple cited proxy statements from only three companies over a ten-year period,[79] and highlighted the lack of case law finding that a company had improperly bundled proposals in violation of the rules.[80] The purported common practice was used to support the ideal that courts should not derail ordinary business practices when it comes to routine bundling.                  

Similarly, a letter from the Council for Institutional Investors (CII) characterized bundling as “rampant.”[81] CII asserted that bundling resulted in a significant disadvantage for shareholders[82] and encouraged the Commission to reallocate resources to police violations.[83] Violations should “be fairly easy to detect” and the Commission should establish a “process to more effectively and efficiently detect such obvious noncompliance with the Rule[s].”[84]

B. The Reality of Bundling in Proxy Practice

Empirical analysis on the frequency of bundling is lacking. This Article attempts to fill some of that gap. Although bundling can be difficult to determine—particularly in connection with the application of a materiality standard—the analysis seeks to uncover examples of proxy statements that grouped together multiple proposals that appears significant. In such instances, the proposals activate concerns under the anti-bundling rules. In addition, this Article took into account examples of litigation where parties alleged that bundling occurred. 

1.  Evidence of Bundling: Empirical Study

To gauge the frequency of bundling, proxy statements were examined from over two hundred publically-traded companies. The sample included: (i) all of the publically-traded companies listed in the 2013 Fortune 100; (ii) a random selection of fifty companies from the S&P 500; (iii) a random selection of fifty companies from the S&P MidCap 400; and (iv) a random selection of fifty companies from the S&P SmallCap 600.[85] After taking into account the overlap between the Fortune 100 group and the fifty randomly selected companies from the S&P 500, the sample totaled two hundred and thirty-one companies.

Of the companies surveyed, only one—other than Apple—grouped together proposals that appeared significant. The other instance observed involved a real estate investment trust that included a series of amendments to its articles contained in a single proposal.[86] The company proposed to eliminate provisions mandated by the North American Securities Administrators Association, Inc. and restate its charter to follow the Maryland General Corporation Law.[87] This “amending and restating” included twenty sub-amendments,[88] ranging from common stock approval rights to distributions to limitations on borrowing.[89] Shareholders ultimately approved the proposal.[90]    

The study suggested that bundling was a possible concern with respect to proposals seeking to amend organizational documents. Additional searches indicated other instances of companies grouping proposals when amending organizational documents.[91]    

2.  Evidence of Bundling: Litigation

In addition, litigation brought by shareholders raises possible concerns with respect to compensation plans. Shareholders sued Groupon, Inc. for allegedly bundling amendments to the company’s incentive plan.[92] The proxy statement sought approval of an “amendment to the Groupon, Inc. 2011 Incentive Plan to increase the number of authorized shares and to increase the individual limit on annual share awards.”[93] Specifically, the amendments sought to increase the number of authorized shares under the plan from 50 million to 65 million and to increase “the maximum allowable shares that can be granted to any one individual in a calendar year from 1,000,000 to 7,500,000 million [sic] shares.”[94] Each of the proposed amendments to the plan constituted separate matters.[95] The complaint asserted that these were “distinct issues” and that “Plaintiffs and Groupon’s other shareholders [we]re being wrongfully denied the right to vote separately on each separate matter, as contemplated by” the anti-bundling rules.[96] Others have brought similar suits.[97]        

The modest number of examples is difficult to characterize. Because the Commission appears to have a materiality threshold for bundling, the fact that companies grouped proposals does not automatically indicate a violation of the rules. Particularly regarding allegations of bundling by litigants in the context of compensation plans, no court has resolved whether the grouping of amendments constitutes impermissible bundling.

C. The Proper Policing Mechanism: Limited Review and Private Actions

The empirical study suggests that bundling is not common. Moreover, the data suggests that when bundling does occur, it involves a consistent set of proposals. With the exception of Koppel, the instances observed in connection with this Article all involved proposals to amend organizational documents or incentive plans.[98]  

The relatively uncommon nature of bundling may have a structural explanation. Companies have a disincentive to bundle together amendments to organizational documents. Because only management can initiate these changes, the pairing of popular or unpopular amendments in the same proposal may facilitate rejection of the entire group. For instance, had enough shareholders opposed the efforts by Apple to repeal the blank check stock provisions, all of the amendments in the proposal would have failed.[99] Management, therefore, has an incentive to unbundle changes to organizational documents.[100]

Suggestions have been made that the Commission reallocate resources to actively monitor compliance with the anti-bundling rules, including “participation of a lawyer or an experienced member of the SEC staff.”[101] Some degree of review already takes place. Rule 14a-6 requires the filing of proxy materials containing proposals to amend organizational documents ten days before distribution.[102] These proxy statements make up a relatively small subset of the total statements filed—the study exhibited only twenty-one of two hundred and thirty-one. Considering that a selective portion of these proxy statements are already reviewed,[103] any reallocation of the Commission’s staff would be not be significant. Furthermore, issuers would not incur additional regulatory barriers because preliminary submissions are already required. Effectively, a limited review would only minimally change the current review process by “reallocating” the Commission’s focus, rather than its resources.

Review by the Commission will nonetheless result in instances where companies group proposals that are either collectively benefiting shareholders[104] or are not clearly material. Moreover, companies may sometimes disagree with the Commission’s characterization.[105] In these circumstances, the Commission has to decide whether to expend the additional resources to resolve the issue. 

A possible resolution is to leave the matter to private enforcement. For example in Greenlight Capital, Apple grouped together proposals that were, as the company argued in litigation, favorable to shareholders.[106] David Einhorn, Greenlight Capital’s principal, however, disagreed.[107] He viewed the elimination of the blank check stock provision as something that could have derailed his efforts to negotiate with Apple.[108] After Apple balked at Einhorn’s negotiation efforts, he filed suit to enjoin the bundling of Apple’s proposal.[109] Accordingly, a limited review, supplemented by private actions, can symbiotically create a more reliable and efficient policing mechanism for the anti-bundling rules.

III.       Conclusion

The anti-bundling rules are a nuanced area of securities law that has garnered limited attention. In the wake of the recent bundling case, Greenlight Capital, however, there has been a movement for greater government oversight for what some perceive as a rampant and blatant in-justice to shareholders. This Article, through an empirical study of over two hundred proxies, has revealed that bundling in general may not be as common as some might suspect. Moreover, the risk of bundling appears to be limited to relatively specific circumstances: amendments to organizational documents and incentive plans. Thus, while the problem requires greater attention from the Commission, the response should be modest and proportionate.      

       [1].     Nos. 13 civ. 900, 13 civ. 976, 2013 WL 646547 (S.D.N.Y. Feb. 22, 2013). Discussed infra Part I.B.2.

       [2].     167 F.3d 125 (2d Cir. 1999).

       [3].     H.R. Rep. No. 73-1383, at 14 (1934) (“Inasmuch as only the exchanges make it possible for securities to be widely distributed among the investing public, it follows as a corollary that the use of the exchanges should involve a corresponding duty of according to shareholders fair suffrage. For this reason the proposed bill gives the Federal Trade Commission power to control the conditions under which proxies may be solicited with a view to preventing the recurrence of abuses which have frustrated the free exercise of the voting rights of stockholders.”); see also J. Robert Brown, Jr., Corporate Governance, The Securities and Exchange Commission, and the Limits of Disclosure, 57 Cath. U. L. Rev. 45, 50 (2007). In passing § 14(a) Exchange Act, Congress did not adopt any substantive rules over the proxy process. Jill E. Fisch, From Legitimacy to Logic: Reconstructing Proxy Regulation, 46 Vand. L. Rev. 1129, 1139 (1993). Instead, Congress made failure to comply with the Commission’s proxy rules unlawful. Id.  

       [4].     S. Rep. No. 73-1455, at 77 (1934).

       [5].     See Exchange Act Release No. 378, 1935 SEC LEXIS 378 (Sept. 24, 1935). Rule LA3(a)(1) required issuers to provide “a statement whether the proxy [was] being solicited by or in [sic] behalf of the management of the issuer.” Id. Rule LA3(a)(2) set forth the required content for statements by directors opposed to solicitation by issuer’s management. Id.

       [6].     See Exchange Act Release No. 1823, 1938 SEC LEXIS 678 (Aug. 11, 1938).

       [7].     Rule X-14A-2(a) required that the proxy statement provide

means . . . whereby the person solicited is afforded an opportunity to specify, in a space provided in the form of proxy or otherwise, the action which such person desires to be taken pursuant to the proxy on each matter, or each group of related matters as a whole, described in the proxy statement as intended to be acted upon.

Id. (emphasis added).

       [8].     Rule X-14A-3 provided that “[e]very printed proxy statement and form of proxy . . . be set in type not smaller than 10-point roman, at least 2-point leaded.” Id.

       [9].     Id. Specifically, Rule X-14A-2(a) required that shareholders receive the right to vote “on each matter, or each group of related matters as a whole.” Id. (emphasis added).

     [10].     Regulation of Communication Among Securityholders, Exchange Act Release No. 34-30849 (June 23, 1992) [hereinafter 1992 Proposal] (proposal of the October 16, 1992, final rule). Overall, the anti-bundling rules were part of a broader reform to shareholder communications to combat what some perceived as the entrenchment of management. Norma M. Sharara & Anne E. Hoke-Witherspoon, The Evolution of the 1992 Shareholder Communication Proxy Rules and Their Impact on Corporate Governance, 49 Bus. Law. 327, 330 (1993) (“The SEC’s review of the proxy rules, especially those rules involving shareholder communication reform, assumed a new sense of urgency due to several factors that dramatically changed the landscape of the corporate world during the 1980s. These factors included changes in the structure of corporate governance. . . . A key influence on changes in the structure of corporate governance was the perceived entrenchment of management . . . .”). See also Bernard S. Black, Next Steps in Proxy Reform, 18 J. Corp. L. 1, 2 (1993) (explaining that the Commission’s “express goal was to make it easier for shareholders to communicate with each other”). Additional factors that influenced the Commission’s action were: “new developments in financial markets . . . and the increasing importance of institutional investors to both corporations and the various stockmarkets.” Sharara & Hoke-Witherspoon, supra, at 330.  

     [11].     Sharara & Hoke-Witherspoon, supra note 10, at 343, n.134. For a detailed discussion on the debate see Joseph Evan Calio & Rafael Xavier Zahralddin, The Securities and Exchange Commission’s 1992 Proxy Amendments: Questions of Accountability, 14 Pace L. Rev. 459, 467‒68 and accompanying footnotes.  

     [12].     Regulation of Communication Among Securityholders, Exchange Act Release No. 31326, 52 SEC Docket 2028 (Oct. 16, 1992) [hereinafter 1992 Final Proxy Amendments].

     [13].     1992 Proposal, supra note 10 (emphasis added). Similarly, Rule 14a-4(b)(1) provides that shareholders shall have a right “to specify by boxes a choice between approval or disapproval of, or abstention with respect to each separate matter referred to therein.” Id. (emphasis added). The Commission noted that shareholders should be free “to communicate to the board of directors their views on each of the matters put to a vote, and not be forced to approve or disapprove a package of items and thus approve matters they might not if presented independently.” Id.

     [14].     Id. See also Black, supra note 10, at 42 (“We applaud the SEC’s effort to require unbundling of manager proposals. When companies, for example, combine a special dividend with manager-entrenching charter amendments, shareholders should be able to vote for the dividend and against the charter amendments. The managers will retain their power under state law not to go forward with the dividend unless the charter amendments are approved.”).    

     [15].     1992 Proposal, supra note 10.

     [16].     1992 Final Proxy Amendments, supra note 12.

     [17].     Id.

     [18].     Id.

     [19].     Id.

     [20].     Id.

     [21].     Id.

     [22].     Id.

     [23].     Calio & Zahralddin, supra note 11 (quoting David R. Sands, Investors Victors in Wide SEC Reforms, Wash. Times, Oct. 16, 1992, at C1 (quoting the then Commission Chairman, Richard Breeden)) (alteration in original).

     [24].     1992 Final Proxy Amendments, supra note 12.

     [25].     Id.

     [26].     Id. Some academics have concluded that conditional voting could circumvent the intent of the anti-bundling rules. Lucian A. Bebchuk & Ehud Kamar, Bundling and Entrenchment, 123 Harv. L. Rev. 1549, n.26 (2010). Professors Bebchuk and Kamar explained

Despite [the anti-bundling] name . . . [R]ule [14a-4] does not prevent management from presenting proposals to shareholders for approval as a package. The unbundling rule permits management to condition the adoption of one proposal on the approval of another proposal. The rule requires only that shareholders be able to vote on the proposals separately—even if the approval of only one means that neither is implemented. Moreover, even this weak rule does not cover charter amendments effected through the merger of firms with different charters.


     [27].     See Division of Corporate Finance: Manual of Publicly Available Telephone Interpretations, Fifth Supplement September 2004, SEC, (last modified Sept. 20, 2004).

     [28].     Examples of provisions that would generally have to be separated out included, “classified or staggered board, limitations on the removal of directors, supermajority voting provisions, delaying the annual meeting for more than a year, elimination of ability to act by written consent, and/or changes in minimum quorum requirements.” Id.

     [29].     Id. Unless immaterial, the proposals must be separated for the purposes of voting when:

[T]he provisions in question were not previously part of the company’s charter or bylaws; the provisions in question were not previously part of the charter or bylaws of a public acquiring company; and state law, securities exchange listing standards, or the company’s charter or by-laws would require shareholder approval of the proposed changes if they were presented on their own.

Id. The Commission also explained that when a “new acquisition vehicle” is used to complete a merger or acquisition that the rules “require[] that those provisions be set out as separate proposals. . . . To determine that shareholders are not actually approving the proposals under these circumstances would allow form and timing to prevail over substance and defeat the purpose of the rule.” Id.

     [30].     Id. The following example was provided: “[C]ompletion of a merger may be conditioned on separate shareholder approval of the merger transaction and of control-related or governance-related provisions reflected in a merger or other agreement.” Id. 

     [31].     See Executive Compensation Disclosure; Securityholder Lists and Mailing Requests, Securities Act Release No. 7032, Exchange Act Release No. 33229, 1993 WL 483132 (Nov. 22, 1993) (“Companies have asked whether in the case of shareholder approval of amendments to an existing compensation plan, the ‘separate matter’ referred to in Rule 14a–4 applies to each amendment to the plan or only the plan as amended. Registrants have been advised that it is appropriate to provide for a single vote on the plan, as amended, rather than a vote on each amendment in a given plan.”).

     [32].     Id.  

     [33].     See Exchange Act Rule 14a-4(a)(3), Div. of Corp. Fin., SEC, (last modified Jan. 24, 2014).

     [34].     Id. The language apparently originated in an earlier interpretation issued by the Division of Investment Management. See Letter from Carolyn B. Lewis, Assistant Dir., SEC, to Registrant (Feb. 3, 1995), available at The staff answered the questions in terms of whether two proposals must be submitted to holders’ of common stock to effectuate a duly negotiated reduction to the dividend rate of preferred stock—one to reduce the dividend rate and another to extend the maturity date. Compare this interpretation to that of the Division of Investment Management, which recently commented that proposed amendments to investment company charters “should be ‘unbundled’ . . . for each proposed material amendment” and did not repeat the earlier guidance concerning  “intertwined” proposals. Unbundling of Proxy Proposals—Investment Company Charter Amendments, Div. of Inv. Mgmt., SEC, (emphasis added).            

     [35].     Id.  

     [36].     The staff aptly noted that “no bright-line test” exists for determining “materiality.” Id.  

     [37].     Id. The materiality issue was raised in reference to whether individual proposals must be provided for the restatement of organizational documents, incorporating a change in the par value of common stock, the elimination of expired preferred stock, and the declassifying of the board. Id. The staff suggested that where amendments “do not substantively affect shareholder rights,” bundling was permissible because the amendments would not qualify as “material.” Id. If management, however, has reason to know that “shareholders could reasonably be expected . . . to express a view separate from their views on the other amendments,” the amendments must be separated. Id.   

     [38].     Id.  

     [39].     Id. The Commission’s Exchange Act Release No. 7032 failed to clarify whether the bundling of amendments to incentive plans required adherence to the materiality threshold. Issuers now have an answer to that question. 

     [40].     See, e.g., Medtronic, Inc., No Action Letter, 2012 WL 1493950 (June 21, 2012); Alcoa, Inc., No Action Letter, 2011 WL 190599 (Jan. 12, 2011); CSX Corp., No Action Letter, 2002 WL 466577 (Mar. 2, 2002); Poore Bros., Inc., No Action Letter, 2002 WL 464041 (Mar. 2, 2002).

     [41].     See infra note 45. 

     [42].     Medtronic, Inc., No Action Letter, 2012 WL 1493950 (June 21, 2012).

     [43].     Id. The proposal was not specific in the provisions to be amended; instead, it requested that “each shareholder voting requirement in [the] charter and bylaws that call[ed] for a greater than simple majority vote be changed to require a majority of the votes cast for and against the proposals, or a simple majority in compliance with applicable laws.” Id.   

     [44].     Id.

     [45].     Rule 14a-8(c) provides, “Question 3: How many proposals may I submit? Each shareholder may submit no more than one proposal to a company for a particular shareholders’ meeting.” 17 C.F.R. § 240.14a-8(c) (2012) (emphasis added.)

     [46].     Medtronic, Inc., No Action Letter, 2012 WL 1493950 (June 21, 2012). The Commission’s decision in Medtronic is consistent with its decisions in other instances where issuers have raised the anti-bundling rules to exclude shareholder proposals.

     [47].     As of January 20, 2014, a Boolean search including the terms “14a-4(a)(3) or 14a-4(b)(1)” in WestlawNext reveals only eleven published decisions on the anti-bundling rules since their adoption in 1992. Greenlight Capital, L.P. v. Apple, Inc., Nos. 13 civ. 900, 13 civ. 976, 2013 WL 646547 (S.D.N.Y. Feb. 22, 2013); Lewis v. C.R.I., Inc., No. 03 civ. 651, 2003 WL 1900859 (S.D.N.Y. April 17, 2003); In re Real Estate Assocs. Ltd. P’ship Litig., 223 F. Supp. 2d 1109 (C.D. Cal. 2002); Rosenberg v. Nabors Indus., Inc., No. civ.a. H021942, 2002 WL 1431820 (S.D. Tx. June 14, 2002); Koppel v. 4987 Corp., Nos. 96 civ. 7570, 97 civ. 1754, 2001 WL 47000 (S.D.N.Y. Jan. 19, 2001); Sturm v. Marriot Marquis Corp., 85 F. Supp. 2d 1356 (N.D. Ga. 2000); Koppel v. 4987 Corp., 191 F.R.D. 360 (S.D.N.Y. 2000); Koppel v. 4987 Corp., Nos. 96 civ. 7570, 97 civ. 1754, 1997 WL 760512 (S.D.N.Y. Dec. 9, 1997) rev’d, 167 F.3d 125 (2d Cir. 1999); Union of Needletrades, Indus. & Textile Emps. v. May Dep’t Stores Co., 26 F. Supp. 2d 577 (S.D.N.Y. 1997); North Fork Bancorporation, Inc. v. Toal, 825 A.2d 860 (Del. Ch. 2000).  

     [48].     167 F.3d 125 (2d Cir. 1999).

     [49].     Id. at 129.

     [50].     Id. at 129–30.

     [51].     Id. at 130.

     [52].     Koppel v. 4987 Corp., Nos. 96 civ. 7570, 97 civ. 1754, 1997 WL 760512, at *6 (S.D.N.Y. Dec. 9, 1997), rev’d in part by id. at 136.

     [53].     Koppel, 1997 WL 760512, at *6 (relying on Virginia Bankshares, Inc. v. Sandberg, 501 U.S. 1083, 1104 (1991)).

     [54].     Id. Apparently, the district court did not believe that bundling was the type of “deceptive or inadequate disclosure” that the Commission sought to preclude with the adoption of § 14(a). In discussing whether a private right of action existed, the district court, citing J.I. Case Co. v. Borak, 377 U.S. 426, 431 (1964), noted that “purpose of § 14(a) is to prevent management or others from obtaining authorization for corporate action by means of deceptive or inadequate disclosure in proxy solicitation. Defendants satisfactorily disclosed all material information and did not seek authorization for the Solicitation fallaciously.” Koppel, 1997 WL 760512, at *6 (internal quotation marks omitted).

     [55].     Koppel v. 4987 Corp., 167 F.3d 125, 137 (2d Cir. 1999). The Second Circuit reversed the part of the district court’s decision denying a private right of action under the anti-bundling rules; however, it left intact the decision to dismiss of some of the claims under Rule 14a-9. Id.

     [56].     Id. at 135‒36 (citing Touche Ross & Co. v. Redington, 442 U.S. 560, 578 (1979)). After Touche, the Supreme Court went on to endorse a modified version of implied private right of actions under § 14(a) that looked beyond congressional intent to policy concerns, which might limit private actions:

[W]here a legal structure of private statutory rights has developed without clear indications of congressional intent, the contours of that structure need not be frozen absolutely when the result would be demonstrably inequitable to a class of would-be plaintiffs with claims comparable to those previously recognized. Faced . . . with such a claim for equality in rounding out the scope of an implied private statutory right of action, we look[] to policy reasons for deciding where the outer limits of the rights should lie.

Virginia Bankshares, Inc., 501 U.S. at 1104‒05.  

     [57].     Koppel, 167 F.3d at 135 (citing H.R. Rep. No. 73-1383, at 13, 14 (1934)) (emphasis omitted) (internal quotation marks omitted).

     [58].     Id. at 137 (distinguishing policy concerns in Virginia Bankshares that caused the Supreme Court to pause).

     [59].     Id. at 135. On remand, plaintiff’s anti-bundling claims were tried before a jury. Koppel v. 4987 Corp., Nos. 96 civ. 7570, 97 civ. 1754, 2001 WL 47000, at *1 (S.D.N.Y. Jan. 19, 2001). The jury returned a verdict for defendant, id., which was later affirmed by the Second Circuit. Greenberg v. Malkin, 39 Fed. App’x. 633, 635 (2d Cir. 2002). 

     [60].     Nos. 13 civ. 900, 13 civ. 976, 2013 WL 646547 (S.D.N.Y. Feb. 22, 2013).

     [61].     Id. at *1.

     [62].     Apple, Inc., Proxy Statement (Form DEF 14A) (Feb. 7, 2013), available at As the court noted, the history behind Proposal No. 2 was contentious. Greenlight Capital’s principle, David Einhorn, had urged Apple’s board to issue perpetual preferred shares to existing shareholders in order to return excess cash—at the time it was $137 billion—by way of dividends. David Benoit, Apple’s $137 Billion Piggy Bank: Here’s What Einhorn Wants to Tap, Deal Journal (Feb. 7, 2013, 3:57 PM), Apple rejected Einhorn’s plan, and instead, sought to eliminate the board’s ability to unilaterally issue preferred stock. Greenlight Capital, 2013 WL 646547, at *2. 

     [63].     Greenlight Capital, 2013 WL 646547, at *1.

     [64].     Id. at *5. Specifically, Apple argued: (1) the proposal only offered one matter for consideration—amendments to its articles; (2) bundling was a common practice; (3) the Commission did not challenge Apple’s approach; (4) the matters grouped together were not “material”; and (5) the amendments in the proposal were all pro-shareholder in nature. Id.

     [65].     Id.

     [66].     Id.

     [67].     Id. at *6.

     [68].     Id. (citing Pabst Brewing Co. v. Jacobs, 549 F. Supp. 1068, 1076 (D. Del. 1982) (internal quotation marks omitted)).

     [69].     Koppel v. 4987 Corp., 167 F.3d 125, 136 (2d Cir. 1999).

     [70].     Greenlight Capital, 2013 WL 646547, at *6.

     [71].     Id. at *7. The court explained that Rules 14a-4(a)(3) and (b)(1) are not only intended to protect against intentional coercion. Id. Accordingly, the rules do not rest solely on “management’s view of the benefits of an amendment,” id.; instead, the rules were promulgated to allow shareholders to express their views on each proposal independently—so that “it is shareholders, and not boards of directors, who have the exclusive right to decide what is, in fact, truly ‘pro-shareholder.’” Id.   

     [72].     Id.

     [73].     See Apple, Inc., Submission of Matters to a Vote of Security Holders (Form 8-K) (Mar. 1, 2013), available at

     [74].     Notice of Voluntary Dismissal, Greenlight Capital, L.P. v. Apple, Inc., 13 civ. 900 (S.D.N.Y. Mar. 4, 2013). 

     [75].     See, e.g., Brief for Defendant at 4, Greenlight Capital, L.P. v. Apple, Inc. (2013) (No. 13 civ. 900) 2013 WL 520427; Letter from Jeff Mahoney, Gen. Counsel, Council of Institutional Investors, to Lona Nallengara, Dir. of Corp. Fin., SEC (Apr. 26, 2013) (on file with the author) [hereinafter April 2013 CII Letter].

     [76].     Brief for Defendant at 4, Greenlight Capital, L.P. v. Apple, Inc. (2013) (No. 13 civ. 900) 2013 WL 520427.

     [77].     Id. at 14 (emphasis added). It is not entirely clear what Apple meant by “permitted.” If Apple was arguing that the existence of a bundled proposal coupled with lack of action by the Commission infers permission, then that argument was affirmatively struck down by the court in Greenlight Capital.

     [78].     Id.

     [79].     Id. at 13–14. The proxy statements cited by Apple included Ameritrans Capital Corporation’s 2011proxy statement, Airnet Communication’s 2003 proxy statement, and Weiner’s Stores’s 2001 proxy statement.

     [80].     Id. at 12–13.

     [81].     April 2013 CII Letter, supra note 75, at 2.

     [82].     Id.

     [83].     Letter from Jeff Mahoney, Gen. Counsel, Council of Institutional Investors, to Elisse Walter, Chairman, SEC (Mar. 13, 2013) (explaining that “a relatively modest reallocation of existing resources could reduce what appears to be rampant and blatant violations of the SEC’s proxy rules—rules that are critically important to CII members and other investors”) (on file with the author) [hereinafter March 2013 CII Letter]. The CII further portended that it planned “to continue to advocate for an independent, stable, long-term funding mechanism for the Commission” to ensure the reduction of proxy rules violations. Id. at 2.

     [84].     See id. at 2.

     [85].     A spreadsheet with the data from the empirical study is available at

     [86].     Inland Real Estate Corp., Proxy Statement (Schedule 14A) (Apr. 30, 2013), available at

     [87].     Id.

     [88].     The twenty sub-amendments included: (1) Common Stock Approval Rights; (2) Liability of Stockholders; (3) Number and Classification of Directors; (4) Indemnification; (5) Distributions; (6) Distribution Reinvestment Program; (7) Termination of Company; (8) Transactions with Affiliates; (9) Limitation on Total Operating Expenses; (10) Limitation on Borrowing; (11) Real Estate Commissions and Acquisitions Fees and Expenses; (12) Determination of Consideration; (13) Fiduciary Duty; (14) Review of Investment Policies; (15) Limitation on Organization and Offering Expenses; (16) Investment Restrictions; (17) Access to Records; (18) Reports and Meetings; (19) Conversion Transactions; and (20) Roll-ups. Id. Sub-Amendments 17, 19, and 20 were later removed. Inland Real Estate Corp., Proxy Statement (Schedule DEF 14A) (June 19, 2013), available at   

     [89].     Id.

     [90].     With respect to Proposal 3(a), the company adjourned the annual meeting until Monday, July 15, 2013.  The Proposal passed at that meeting. See Inland Real Estate Corp., Current Report (Form 8K) (July 15, 2013), available at

     [91].     Outside the study’s sample, other examples of grouping amendments to organizational documents were observed. Healthcare Trust of America, Inc.’s January 23, 2014, proxy statement contained a proposal to amend and restate its charter similar to that in Inland. Healthcare Trust of Am., Inc., Proxy Statement (Schedule DEF 14A) (Jan. 23, 2014), available at Piedmont Natural Gas Company, Inc.’s January 17, 2014, proxy statement required a single vote to amend multiple provisions requiring more than a simple majority vote in its articles. Piedmont Natural Gas, Inc., Proxy Statement (Schedule DEF 14A) (Jan. 17, 2014), available at Rockwell Collins, Inc.’s December 18, 2013, proxy statement grouped two article amendments into a single proposal, one declassifying the board and another expanding the grounds for removing a board member. Rockwell Collins, Inc., Proxy Statement (Schedule DEF 14A) (Dec. 18, 2013), available at /edgar/data/1137411/000113741113000206/col_12x18x13xproxyxmasterx.htm. 

     [92].     Complaint at 1, MacCormack v. Groupon, Inc., No. 1:13-cv-00940 (D. Del. May 24, 2013), available at

     [93].     Groupon Inc., Proxy Statement (Schedule DEF 14A) (Apr. 29, 2013), at 1, available at

     [94].     Id. at 47.

     [95].     Plaintiffs argued that the proposal involved a third issue. Complaint at 10, MacCormack v. Groupon, Inc., No. 1:13-cv-00940 (D. Del. May 24, 2013) (“whether to ratify or deem void an ultra vires award previously granted by the Board”), available at 

     [96].     Id. The proposal was adopted but initially not certified due to the litigation. See Groupon, Inc., Current Report (Form 8-K) (June 13, 2013), available at (“However, because this proposal is the subject of a pending lawsuit, the Company is not certifying the results of the proposal pending the outcome of the lawsuit. Accordingly, the amendment to the 2011 Plan is not yet effective and the previous terms of the 2011 Plan remain in place.”). The case has, however, settled, although a motion for attorney’s fees is pending. Plaintiffs’ Motion for Attorneys’ Fees and Reimbursement of Expenses, MacCormack v. Groupon, Inc., No. 1:13-cv-00940 (D. Del. Sept. 27, 2013), available at

     [97].     Complaint at 2, Todic v. Star Scientific, Inc., No. 1:13-cv-01994 (D. Del. Dec. 4, 2013) (alleging the bundling of two amendments to an existing incentive plan: (1) increase shares available for issuance, and (2) increase amount of shares that may be issued to a participant in one year), available at; Compliant at 1–2, Braunstein v. Geospace Technologies Corp., No. 1:13-cv-01098 (D. Del. June 19, 2013) (alleging the bundling of two amendments to an expired incentive plan: (1) revival of expired key employee stock option plan, and (2) ratify options that were mistakenly issued under the expired plan). The suit of against Star Scientific was voluntarily dismissed on January 8, 2014, after the district court, by oral order, denied plaintiff’s injunction request. As a result of the suit against Geospace, it unbundled its proposal. Shareholders approved the unbundled proposals in a special meeting on February 6, 2014. Geospace Techs. Corp., Submission of Matters to a Vote of Security Holders (Form 8-K) (Feb. 10, 2014), available at Accordingly, the Geospace suit was voluntarily dismissed.       

     [98].     Notably, the study’s data and the instances observed were from the 2013‒14 proxy season. Greenlight Capital was filed in February of 2013. Public companies filing after the Greenlight Capital case were, therefore, aware of concerns over bundling and could have altered their practices. To judge the effect Greenlight Capital had on bundling practices, the 2012 proxy statements were reviewed from all public-traded companies on the 2013 Fortune 100. There was only one instance of a company grouping a number of proposals—Prudential Financial, Inc.’s March 27, 2012 proxy statement.  The proxy statement is available at The provision sought to eliminate supermajority requirements in multiple sections of the articles and make a number of other, mostly ministerial, changes in the articles.  This review suggests that Greenlight Capital did not have a material effect on past bundling practices.  

     [99].     This proposition is further supported by reference to Apple’s 2014 proxy statement. Apple has included three of the four proposals at issue in Greenlight Capital in its 2014 proxy statement—including the elimination of blank check preferred stock. The proposals are separated into three voting proposals and are not conditioned. Apple, Inc., Proxy Statement (Schedule 14A) (Jan. 10, 2014), available at

   [100].     This could change as issuers become more responsive to votes on prior year shareholder proposals. For example, management could condition the adoption of an amendment that shareholders have approved in a prior advisory vote on the affirmative vote of a pro-management amendment. There were no signs of this practice, however, in the proxy statements reviewed.

   [101].     March 2013 CII Letter, supra note 83, at 3.

   [102].     Absent a solicitation in opposition, the Commission generally does not require preliminary proxy materials when the solicitation relates only to: (1) the election of directors, (2) the approval of the accounting firm; (3) shareholder proposals; (4) a shareholder nominee for director included pursuant to § 240.14a–11, an applicable state or foreign law provision, or a registrant's governing documents as they relate to the inclusion of shareholder director nominees in the registrant's proxy materials; (5) approval of executive compensation plans; (6) certain advisory or other contract or agreement that previously has been the subject of a proxy solicitation for which proxy material was filed with the Commission pursuant to this section for investment companies; (7) proposals to increase authorized shares of an open-end investment company; and/or (8) advisory votes related to executive compensation. See 15 U.S.C. § 78n (2012).     

   [103].     The Commission notes that “[t]o preserve the integrity of the selective review process, the [Commission] does not publicly disclose the criteria it uses to identify companies and filings for review.” Filing Review Process, Div. of Corp. Fin., SEC, /divisions/corpfin/cffilingreview.htm (last modified Nov. 8, 2013).

   [104].     See Rockwell Collins, supra note 91.

   [105].     See Letter from Gary J. Simon, Counsel, Benihana, Inc., to Sonia Bednarowski & Justin Dobbie, SEC (Oct. 3, 2011) available at

   [106].     See supra note 64.

   [107].     See Benoit, supra note 62.

   [108].     Id.  

   [109].     Id.  

        *     J.D. Candidate 2014, University of Denver Sturm College of Law. I am grateful for the unabashed support and guidance of Professor J. Robert Brown, Jr. I have also benefited from the editing and cite support of the Denver University Law Review. Any errors or omissions remain my own.