Home -> Law Blog Directory -> Corporate & Securities Law Blogs -> Institutional Shareholder Services -- Corporate Governance Blog

Corporate & Securities Law

: Institutional Shareholder Services -- Corporate Governance Blog

SEC Reverses Omission of Antibiotics Proposal at TysonSubmitted by: Carolyn Mathiasen, US Research Team for ESG Issues

It?s rare for the Securities and Exchange Commission staff to reverse itself on a no-action ruling allowing a company to omit a social policy shareholder resolution from its proxy statement. That happened Dec. 15, however, when the SEC staff told Tyson Foods that it would have to allow investors at its February annual meeting to vote on a proposal on antibiotics in hog feed.

The resolution, co-sponsored by the Adrian Dominican Sisters and Christus Health, asks Tyson?s board to adopt a policy to phase out the routine use of animal feeds that contain certain antibiotics for both the company?s own hog production and its contract suppliers of hogs. The proposal requested a report on the timetable and measures for implementing the policy, as well as the annual publication of data on antibiotics in the feed given to Tyson livestock.

On Nov. 25, the SEC staff issued a no-action letter concluding that Tyson could omit the resolution because it dealt with an ?ordinary business? matter that should be up to management to decide. The ordinary business exclusion in SEC Rule 14a-8(i)(7) is the one used most frequently by companies to exclude social issues resolutions. In this case, the staff defined the ordinary business element as ?the choice of production methods and decisions relating to supplier relationships.?

Paul Neuhauser, a long-time lawyer for church groups affiliated with the Interfaith Center on Corporate Responsibility, told RiskMetrics at the time that he was ?flabbergasted? by the ruling. While appeals of staff rulings usually come to naught, he sent a Dec. 7 letter to the SEC protesting that the staff had failed to ?discern a significant policy issue? that clearly exists. He argued that antibiotic-fed hogs posed a serious public health threat, not an ordinary business matter, noting that the ?threat may primarily be in the future, but that does not make the threat any less grave, or less real.? Neuhauser also pointed out that the U.S. Food and Drug Administration ?already has criteria for denying applications by drug makers for the use of new drugs in animals, but unfortunately these rules were not applied retroactively when the FDA adopted them in 2003.?

In its Dec. 15 reversal, the staff noted that there had been precedent for the original judgment in the exclusion of resolutions in 2002 and 2003. But it added, ?At this time, in view of the widespread public debate concerning antimicrobial resistance and the increasing recognition that the use of antibiotics in raising livestock raises significant policy issues, it is our view that proposals relating to the use of antibiotics in raising livestock cannot be considered matters relating to a meat producer's ordinary business operations.? The SEC noted that the European Union has banned the use of most antibiotics as feed additives, and that legislation had been introduced in Congress to limit the non-therapeutic use of antibiotics in animals.

The Tyson decision is latest indication that the SEC staff is taking a harder look at omission requests on ordinary business grounds. In late October, the staff issued a Staff Legal Bulletin indicating that shareholder resolutions that relate to a company?s internal assessment of business risk would not be routinely excluded.

Full post as published by Institutional Shareholder Services -- Corporate Governance Blog on December 22, 2009 (boomark / email).