Microsoft in Rare Move Skips SEC Input to Bar Investor Plan (1)

Microsoft Corp. this month blocked an activist investor’s proposal from its annual meeting agenda without written support from the SEC, a rare corporate move that comes a month into the government shutdown.

The tech giant in August asked the Securities and Exchange Commission for its support to exclude shareholder John Chevedden’s proposal from its proxy statement, which it released Oct. 21. But the agency never responded before the government closure began Oct. 1. The resolution urged Microsoft to have an independent chairman for its board. Satya Nadella serves as both the company’s chairman and chief executive officer.

“It’s kind of an unwritten rule that you don’t do that,” Chevedden said of Microsoft’s decision to forgo SEC feedback. “I guess they’re taking advantage of the government shutdown.”

Chevedden on Wednesday urged shareholders to vote against the reelection of Sandra Peterson, the chair of the governance committee on Microsoft’s board, saying she was ultimately responsible for the omission.

Peterson didn’t immediately respond to a request for comment.

Allison Handy, a Perkins Coie LLP partner representing Microsoft, said in an Oct. 21 letter to the SEC that Chevedden’s proposal was not submitted in a timely fashion, which is a legal basis for exclusion. Chevedden has maintained that he submitted the proposal on time.

The decision to omit was also based on “the informal nature of the no-action response process,” the SEC’s “ongoing limited operations,” and agency staff’s “concurrence with exclusion in similar circumstances,” according to Handy’s letter.

A Microsoft spokesperson declined to comment.

Companies are not required to seek SEC approval before leaving shareholder proposals off their ballots ahead of annual meetings. But allowing the agency to weigh in is a longstanding best practice, as the SEC can bring enforcement actions against companies for wrongly omitting proposals.

The SEC is unable to advise companies on whether they can exclude shareholder proposals from their proxy statements during the shutdown, according to the agency. Companies and shareholders should “work together to resolve questions to the best of their ability,” the SEC said.

Microsoft’s annual meeting is Dec. 5.