Rule 14a-8 (the Rule) serves as vehicle for communications between companies and investors. Considered a fixture of the shareholder governance movement, the Rule to some degree amounts to an extension of ownership rights granted under state law. The Rule affords shareholders of a publicly traded company the right to include proposals in the annual proxy materials. The Rule also includes thirteen substantive grounds to omit a proposal.
The burden of establishing an exclusion generally falls on the issuer. The SEC Staff (Staff), however, has provided little guidance on the level of evidence needed to meet the requirement. Indeed, analysis suggests that, in fact, the Staff often does not require that issuers meet this burden by providing empirical support for factual assertions made in no action letter requests.
This Article seeks to examine the history of the company’s burden of proof under Rule 14a-8. Part II of this Article traces the development of the burden from the first mention in 1954 to the eventual inclusion in the language of the rule. Part III focuses on the modern application of the burden. Finally, Part IV argues that the Staff of the Commission has at times required such little evidence as to effectively render the burden of proof meaningless.