(Photo: Mike Mozart of JeepersMedia, via Wikimedia Commons)
On Monday a three-judge panel of the U.S. Court of Appeals for the Third Circuit gave Wal-Mart Stores Inc. a win against shareholders concerned about the company’s sales of assault rifles, ruling that Wal-Mart can refuse to put to a vote a proposal calling for firmer board oversight of gun sales.
Trinity Wall Street, New York City’s historic Episcopal parish and an owner of Wal-Mart stock, went to court last year calling for the company to allow shareholders to vote on whether the board should apply standards around decisions to sell rifles with high-capacity magazines and other products that could endanger public safety and the company’s reputation. Though the federal appeals court decided the proposal interfered with the company’s “ordinary business operations,” the ruling focused on questions around corporate governance and investor involvement with hot-button issues.
Theodore Boutrous Jr., an attorney with Gibson, Dunn & Crutcher who represented Wal-Mart in the case, said the court’s decision addressed issues that boards of directors, corporate secretaries and officers of companies often grapple with in regard to striking a balance between the voice of shareholders and the prerogatives of management.
“The ruling makes it clear that shareholders seeking to intrude on the nitty-gritty, day-to-day business operations is excludable,” he said. “That is very important from a corporate governance perspective.”
Boutrous also noted various other ways shareholders could express their views, including the option of voting for different directors and sending out their own proxy materials.
He added, “I think the use of shareholder proposals simply to get across a social viewpoint or political point diverges from a company’s business and what management should be focusing on. Wal-Mart, like any other company, has a structure on its board to address social policy issues, safety and the like.”
Wal-Mart had argued that Trinity’s proposal conflicted with U.S. Securities and Exchange Commission guidance on proxy questions.
Joel Friedlander, an attorney for Trinity, did not immediately respond to requests for comment, but CorpCounsel.com received a statement from Trinity. “While agreeing that Trinity raised an important social policy issue, we are disappointed that the majority nonetheless accepted Wal-Mart’s argument,” said Rev. Dr. William Lupfer, the church’s rector.