SEC States Succession Planning a Key Board Responsibility
In the past the SEC has supported the exclusion of shareholder proposals calling for succession planning transparency. Corporate Boards have been able to Rely on Rule 14a-8(i)(7) to exclude this type of information in the proxy. Rule 14a-8(i)(7) allows corporations to exclude information relating to the day to day management of the workforce.
Shareholder proposals for strategic succession planning are now getting support from the SEC. The SEC has changed its stance of classifying succession planning as part of the day to day operations. Succession Planning is now considered a risk item that needs to be addressed. See SEC Staff Legal Bulletin No. 14E (CF)
“One of the board’s key functions is to provide for succession planning so that the company is not adversely affected due to a vacancy in leadership. Recent events have underscored the importance of this board function to the governance of the corporation. We now recognize that CEO succession planning raises a significant policy issue regarding the governance of the corporation that transcends the day to-day business matter of managing the workforce. […] Going forward, we will take the view that a company generally may not rely on Rule 14a-8(i)(7) to exclude a proposal that focuses on CEO succession planning.”