Bloomberg reports:
New York City Comptroller Scott Stringer, in a Feb. 7 letter obtained by Bloomberg Law, called for the investigation into what he says are “dramatically” contrasting stories about Oracle’s pay practices. The Labor Department has alleged in an ongoing lawsuit that the software maker systematically shorted women and minorities $400 million in wages.
Oracle’s board painted a different pay picture when it recently tried to quash a shareholder proposal seeking disclosures on any gender-based pay gaps at the company, Stringer wrote. The board told investors to vote against the proposal at its most recent annual meeting, citing Oracle’s commitment to avoiding gender pay gaps.
Stringer called the board’s statement “a model of self-promotion, avoidance, and evasion.” New York City’s pension funds, which hold about 6 million Oracle shares, supported the pay gap proposal.
This prompted Ann Lipton to tweet:
So as I understand it, Scott Stringer is alleging Oracle committed securities fraud in its management recommendation against a shareholder proposal, is that right? Been waiting for something like this but I don't remember seeing it before. https://t.co/mkOKUzCqER
— Ann Lipton (@AnnMLipton) February 8, 2019
There aren't a ton of cases but there have been a few. United Paperworkers Intern. Union v. Intl. Paper Co., 985 F.2d 1190, 1198 (2d Cir. 1993), is especially interesting because it held that any shareholder (not just the proponent) could bring a 14a-9 suit where management's response to a shareholder proposal put forward under Rule 14a-8 was fraudulent.
A case that may be particularly pertinent to the Oracle litigation is Amalgamated Clothing and Textile Workers Union, AFL-CIO v. J. P. Stevens & Co., Inc., 475 F. Supp. 328 (S.D.N.Y. 1979), vacated sub nom. on other grounds, Amalgamated Clothing and Textile Workers Union v. J. P. Stevens & Co., Inc., 638 F.2d 7 (2d Cir. 1980).
Labor unions that held stock in Stevens alleged Stevens had committed numerous violations of the federal proxy rules, the most pertinent of which for present purposes alleged "proxy rule violations in statements made by Stevens in response to shareholder proposals submitted at the 1976, 1977 and 1978 annual meetings."
The 1976 shareholder proposal recommended that the Stevens Board appoint a committee of outside directors to study and report to shareholders on the costs of Stevens' then current labor disputes. The 1977 proposal requested the Board to report to shareholders on Stevens' labor policies and practices. Three 1978 proposals requested a Board report to shareholders on the company's labor policies and practices, the impact of the company's labor-management policies on the economic performance of the company's stock, and on employee occupational safety and health. A fourth 1978 proposal asked the Board to establish a review committee to advise on management-employee relations. Each of these proposals was overwhelmingly defeated. The complaint alleges that management's statements addressed to these proposals were misleading essentially for failure to include the same kinds of information which plaintiffs contend should have been included in the proxy statements.
The court explained:
Section 14(a) of the 1934 Act prohibits solicitation of proxies “in contravention of such rules and regulations as the Commission may prescribe . . . .” Rule 14a-9 prohibits solicitation by means of a proxy statement which contains “any statement which, at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or which omits to state any material fact necessary in order to make the statements therein not false or misleading. . . . ” ...
Plaintiffs contend that the proxy rule requires in connection with the election of directors the disclosure of Stevens' alleged corporate policy to “thwart”, “resist”, and “abuse” the federal labor laws as well as alleged expenses (primarily legal fees) resulting from such policies. Plaintiffs do not dispute that Stevens has disclosed the various labor litigation in which it has been involved and the specific findings of labor law violations. Rather, disclosure is sought of the corporate policy to thwart the labor laws in substance the aims and intentions of the Stevens board with respect to a body of law.
The court rejected plaintiff's claims, inter alia, because "the proxy rules simply do not require management to accuse itself of antisocial or illegal policies."
As to management's responses to the shareholder proposals, once again management is not required to accuse itself of evil or illegal intentions. Plaintiffs' claim here is somewhat stronger because management did make self-serving declarations in response to the proposals, including statements that “it is not and never has been (Stevens') policy to violate (the) law”; that Stevens has “a total commitment to conduct (its) affairs completely within the law”; that “the Company has offered contract terms (to its employees) believed to be fair and reasonable”; and that “the Company costs . . . attributable to the union organizing and related activities are not material in the Company's overall operation.”
If management had undertaken in its responses to recite facts establishing its innocence, such recitation might well give rise to an obligation to disclose any additional facts needed to put the statements made in perspective or prevent them from being misleading. But the assertions complained of here amount to nothing more than protestations of innocence of mind. They do not give rise to an unrealistic obligation to declare guilt.
In my view, allegations of "self-promotion, avoidance, and evasion" likewise "do not give rise to an unrealistic obligation to declare guilt."