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Activism at Sharehold Expense

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A federal district court recently ruled against John Chevedden in his bid to get a shareholder proposal included in Express Scripts' proxy materials. The company did not want to include the proposal because it contained material facts that directly contradicted statements in the company's public filings. After Express Scripts filed suit, Mr. Chevedden agreed to correct some of the errors--something he apparently had not offered in response to earlier requests from the company. The court held that the company could exclude the Chevedden proposal because, "[e]ven if Chevedden's revised proposal was timely, which it clearly is not, there are still substantial inaccuracies in the revisions to the supporting statement that render the revised proposal subject to exclusion" under the SEC's rules.

Mr. Chevedden is an experienced crafter of shareholder proposals. The Manhattan Institute's Proxy Monitor reported that just under a quarter of shareholder proposals between 2006 and 2013 "were sponsored by just two individuals, John Chevedden and Kenneth Steiner, and their family members and trusts." In a 2007 comment letter to the Securities and Exchange Commission, Mr. Chevedden explained that "[t]he current resolution process ensures that management and the Board focus a reasonable amount of attention to the issue at hand as they must determine their response to the shareholder proposal." The shareholders footing the bill might not agree that companies should be forced to spend time and resources responding to proposals that contain material inaccuracies.

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Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.