NLPC, which is invested in numerous Fortune 500 companies, has filed three separate complaints since the beginning of February with the Securities and Exchange Commission against Coca-Cola, Disney and Starbucks.
The reasons delve into some of the arcane rules regarding the responsibilities of public companies to make disclosures to shareholders about the conduct of, and risks to, their businesses — and their truthfulness and transparency in doing so. Everything corporations report under SEC rules and laws — like quarterly reports, annual reports, special transactions, insider stock sales or acquisitions, major acquisitions — are considered significant events, and must be disclosed to the SEC for the benefit of transparency to their shareholders, and must be accurate and truthful. Proxy statements — which serve as disclosures with regard to boards of directors, top executives and their compensation, and serve as agendas for companies’ annual shareholder meetings — also fall under these disclosure requirements. All information reported must be correct and cannot be “materially misleading,” or the company can be subject to discipline and penalties.
NLPC’s grievances against these three companies have to do with changing the wording of proposals we submitted to them, to mean something other than what we intended. This includes listing proposal titles on proxy voting cards under different names so as to change their meanings or confuse voting shareholders, or making it more difficult for proxy statement readers to connect the proposals’ listings and text in the body of the proxy statements with how they are listed on the proxy voting cards.
These cases might sound like “no big deal,” but when investors want to hold corporate management accountable for the assets they manage on shareholders’ behalf, they want their concerns in proposals to be represented accurately and as intended in proxies and at annual meetings. Companies already have an enormous rules advantage compared to shareholders when it comes to whether proposals get access to proxy statements and then how they are disseminated to shareholders, so for them to cheat — as NLPC claims Coca-Cola, Disney and Starbucks have done — should not be tolerated.
The gist of our complaints follows — all fall under the category of “false or misleading proxy materials.”
We submitted a shareholder proposal on Oct. 24, 2024 for Coca-Cola’s 2025 annual meeting that we titled (within the 500-word proposal limit), “Revisit DEI Goals in Executive Pay Incentives.” In an email exchange with the company’s legal counsel, we requested to be provided a copy of how our proposal will appear in the proxy statement prior to its publication, and our request was denied. The company changed the name of the proposal as listed in the statement and on the proxy voting card to “Shareowner Proposal Regarding DEI Goals in Executive Pay.” We maintain that this significantly changes the nature and intent of the proposal, confuses voting shareholders, as something “Regarding” DEI goals is very neutral compared to asking the company to “Revisit” them. This materially misleads shareholders and this intentional change could have been corrected had our request to view the proposal prior to printing been granted.
Further, the company submitted the proposal to the Division of Corporation Finance seeking no-action relief solely on the basis that the proposal had already been “substantially implemented” by the Company under Rule 14a-8(i)(10). The Staff determined that “We are unable to concur in your view that the Company may exclude the Proposal under Rule 14a-8(i)(10). In our view, the Company has not substantially implemented the Proposal.”
In the same email exchange referenced above, we noticed that the opposition statement sent by the Company to us as a preview before the proxy printing nonetheless made the same claim, that “the Company has substantially implemented the proposal,” citing the same arguments the Company made in its no-action pleading to the Staff. We sent a warning notice to the Company’s legal counsel that the opposition statement made a claim that Staff determined was not true, that we would consider the statement materially misleading if the Company did not change it, and that it would be subject to possible SEC complaint if it was not changed. The Company’s legal counsel notified us in response that the statement as originally sent would still appear in the 2025 Proxy Statement.
So the Company has willfully maintained materially misleading stance on our shareholder proposal, in addition to deceptively editing it for the purposes of consideration by shareholders.
Translation for the average Joe: Coca-Cola claimed to the referees at the SEC that the company should be allowed to exclude NLPC’s proposal because it was “already reviewing DEI executive incentives.” The SEC firmly rejected the company’s claim, disagreeing that it had already “substantially implemented” NLPC’s proposal. But Coca-Cola went ahead and told shareholders the same thing in the proxy statement anyway, urging them to vote against it. We would call that “lying” but we will go with the SEC’s term “materially misleading.”
For the years 2024 and 2025, The Walt Disney Company provides proposal numbers on its proxy statements ONLY for management proposals, NOT for shareholder proposals. This is an obvious attempt by the company to facilitate for voting shareholders to find items on the proxy card (which is not supplied with the online proxy statement) the ability to locate and identify [management’s] own proposals which they support, but not those shareholder proposals which management opposes.
On Disney’s 2024 proxy statement, only the first four proposals (which start on Page 88) — those sponsored by management — were enumerated. Those following (starting on Page 100), submitted by shareholders, had no identifying numbers to match what’s on the proxy voting card. Also, the company changed the name of NLPC’s proposal, for the purposes of how it’s listed for voted upon, from “Gender-Based Compensation Gaps and Associated Risks” to “Report on Gender Transitioning Compensation and Benefits.” As a result, an investor casting a vote but who did not read the supporting statement in the proxy doesn’t know whether the proposal is a “pro” or “con” regarding the benefits, because the terms “gaps” and “risks” are removed.
For Disney’s 2025 proxy statement, management’s favored enumerated proposals start on Page 81. Those disfavored by management, with numbers omitted, start on Page 84. Titles of proposals again are changed. The proposal submitted by NLPC was excluded from the proxy statement as Disney requested, and the SEC allowed.
As a shareholder proponent, we submitted a proposal to Starbucks Corporation (SBUX) titled “Protecting Shareholder Value and Respecting Rights of ALL Employees.” In publishing our proposal (No. 6, Page 92) in its 2025 proxy statement, Starbucks changed the title to “Shareholder proposal requesting a report on human rights risks related to labor organizing.” The title we submitted, within our allowed 500-word limit, is nowhere listed.
Starbucks did not notify us that it planned to make this change when it provided us its planned opposition statement as required under Rule 14a-8. Only the opposition statement was provided to us; not our proposal as it would appear in the proxy statement.
The title, which is materially misleading for proxy readers and voting shareholders, should not have been changed. Voters often only go by a title of a proposal when they vote and don’t review supporting statements, and therefore a title provided by the proponent must remain intact.
NLPC’s bottom-line: Starbucks is another example of a company (as with Coca-Cola and Disney mentioned above) softening the language in the title so voting shareholders don’t know what they are voting in support of (or against).
This is the kind of conduct by corporations that NLPC — since expanding our shareholder activism with the 2022 proxy season — has noticed consistently. Boards and executives want to make it as difficult as they can for their shareholders to understand what they are voting for, to depress vote counts as much as possible for proposals they oppose.
Companies and their lawyers — often aided by outside legal specialists in SEC law — spend thousands upon thousands of dollars just to get shareholders’ proposals excluded from annual meetings. They are sticklers on the rules and will search every nook and cranny (or jot and tittle for Bible readers) to find openings upon which they can argue to the SEC to get proponents’ submissions omitted.
Yet they play fast-and-loose with the rules themselves. So enough with the juvenile shenanigans. The time is well past to hold leadership accountable to the same rules they expect shareholders to follow.
