Hunton Retail Law Resource

Many retailers are preparing for an increase in shareholder activism in late 2020 and early 2021.  The COVID-19 pandemic largely sidelined activist hedge funds in the spring, but as investors and companies have evolved to the “new normal,” activist hedge funds will start engaging with new targets.  The retail industry has been severely affected by the pandemic and is particularly vulnerable to activists who accumulate shares at historically low prices and then pressure companies to shift strategy.

As reported in our previous client alert, on September 6, 2019, the staff in the Securities and Exchange Commission’s Division of Corporation Finance (the Division) announced important changes to the Division’s process for administering Rule 14a-8 no-action requests regarding shareholder proposals. Specifically, the staff may respond orally rather than in writing to no-action requests. Moreover, the staff may decide not to take a position on the merits of certain requests, thus leaving to the company the decision of whether to include or exclude the shareholder proposal.

In recent years, publicly traded retailers have experienced a significant uptick in interest from investors focused on Environmental, Social and Governance (“ESG”) issues. On April 23, 2018, the Department of Labor (“DOL”) released Field Assistance Bulletin 2018-01 (the “FAB”). The FAB applies to certain retirement plan fiduciaries who make investment and proxy voting decisions that derive from ESG concerns, and may impact investor behavior at public retailers.

Read our full alert.

Recently, the Securities and Exchange Commission (“SEC”) allowed Apple Inc. to exclude a shareholder proposal from its proxy statement that requested that Apple “produce a report assessing the climate benefits and feasibility of adopting store-wide requirements for having all retail locations implement a policy on keeping entrance doors closed when climate control (especially air-conditioning during warm months) is in use.” 

On November 1, 2017, the staff of the Securities and Exchange Commission (“SEC”) issued Staff Legal Bulletin No. 14I, which provides additional guidance for public companies (including retailers) seeking to exclude certain shareholder proposals from their proxy materials. Under this bulletin, the SEC staff now expects boards of directors to analyze shareholder proposals before companies make no-action requests to exclude such proposals from proxy materials under Rule 14a-8(i)(7) (the ordinary business exception) or Rule 14a-8(i)(5) (the economic relevance ...

In 2015, there was a record number of activist shareholder campaigns in the United States. Although activist hedge funds targeted companies across numerous industries, several retail companies found themselves in activists’ crosshairs. These included companies such as fast-food restaurant chains, convenience store operators, auto parts retailers and department store retailers.