Activist Shareholders Must Comply with SEC Proxy Rules

Chamber Files Brief Urging Court to Reject Special Interest Agenda

WASHINGTON, D.C.—The U.S. Chamber's National Chamber Litigation Center (NCLC) today urged a federal court to dismiss a lawsuit by activist shareholder Lucian Bebchuk, a Harvard law professor who often uses litigation to further his academic notions of corporate governance. NCLC's amicus brief in Bebchuk v. Electronic Arts, Inc. exposes the professor's scheme to force companies to include in their proxy materials a proposal from a minority shareholder that, if adopted, would allow other shareholders to bypass the proxy rules established by the Securities and Exchange Commission (SEC).

"The Bebchuk proposal would allow minority activist shareholders to circumvent SEC rules to launch proxy battles for corporate control," said Robin Conrad, NCLC's Executive Vice President. "As a consequence of this ill-conceived scheme, national uniform rules for proxy solicitations will be replaced by a crazy quilt of ad hoc procedures subject to the whims of minority shareholders – exactly the result that the SEC considered and rejected."

SEC Rule 14a-8 protects investors by providing managers and directors with flexibility to decide whether shareholder proposals that meet certain procedural requirements should be included among the company's proxy materials. Bebchuk's proposed amendment to Electronic Art's bylaws would allow minority shareholders to bypass SEC Rule 14a-8 and force the company to include in its proxy materials virtually all shareholder proposals. In its brief, NCLC argued that Bebchuk should not be permitted to use Rule 14a-8 in order to effectively nullify the rule itself.

"Corporate boards have a duty to protect the interests of all shareholders, not the special interests advanced by this proposal," said David Hirschmann, President of the Center for Capital Markets Competitiveness at the U.S. Chamber of Commerce. "Unfortunately, real investors and real businesses pay the price tag for these kinds of proxy experiments."

NCLC is the public policy law firm of the U.S. Chamber of Commerce that advocates fair treatment of business in the courts and before regulatory agencies. The U.S. Chamber of Commerce is the world's largest business federation representing more than 3 million businesses and organizations of every size, sector, and region.

www.uschamber.com

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