Manufacturers Join Case Contesting SEC Clout Over Proxy Ballots

The Fifth Circuit has let the National Association of Manufacturers step into a lawsuit challenging the SEC’s power to sway what shareholder proposals make it onto proxy ballots for company annual meetings.

Judge Jennifer Walker Elrod of the US Court of Appeals for the Fifth Circuit on Thursday granted NAM’s motion to intervene in the case, brought last month by a conservative organization. It was filed after the SEC advised Kroger Co. that it could block the group’s proxy proposal from its upcoming annual meeting. The Securities and Exchange Commission has no authority to dictate which proxy ballot items investors should consider under the agency’s shareholder proposal regulation, known as Rule 14-a8, the manufacturers association said in its motion.

“The NAM looks forward to arguing that the SEC’s compelled-speech regime under Rule 14a-8 violates manufacturers’ First Amendment rights and prioritizes activists’ agendas over the needs of long-term shareholders,” Charles Crain, the organization’s senior director for tax and domestic economic policy, said Friday in a statement to Bloomberg Law.

• An SEC representative didn’t immediately respond to a request for comment.
• The National Center for Public Policy Research sued the agency on April 28 after it approved a Kroger plan to free the grocer’s proxy ballot of an anti-discrimination resolution from the group ahead of the company’s June 22 annual meeting.
• The SEC can bring enforcement actions against companies that toss proposals against its guidance.

The case is National Center for Public Policy Research v. SEC, 5th Cir., No. 23-60230, motion to intervene granted 5/25/23.