Rule 14a-8 under the Securities Exchange Act of 1934 requires companies that are subject to the federal proxy rules to include shareholder proposals in their own proxy statements to shareholders, subject to certain procedural and substantive requirements. No similar requirement exists under California's General Corporation Law. Companies wishing to exclude a shareholder proposal under Rule 14a-8 will typically seek no-action advice from the Securities and Exchange Commission's staff. While not binding on either the Commission or the courts, these no-action letters have become a de facto body of Rule 14a-8 "law".
Phillip Goldstein, the co-founder of Bulldog Investors, has recently begun a campaign against a 2017 staff no-action position that has allowed trusts to exclude shareholder proposals when the trust documents forbid shareholders from voting on a matter “unless the matters covered by the proposal are among the enumerated matters specifically described in the Declaration of Trust or the Board was to declare a proposed action as being advisable and, in its sole discretion, direct that the matter be submitted to the shareholders for approval or ratification". RAIT Financial Trust (March 10, 2017). See Harvard Law School Forum on Corporate Governance, "Can a Public Company Effectively Opt Out of Rule 14a-8?", March 30, 2020.
While acknowledging that all of the no-action letters to date have involved trusts rather than corporations, Mr. Goldstein argues "there is no reason a corporation could not use it, e.g., by adopting a bylaw to limit proposals that shareholders may vote upon to those submitted by the board or mandated by statute".
Would such a bylaw provision be permissible under the California General Corporation Law? Section 212(b) of the Corporations Code provides that the bylaws may contain any provision, not in conflict with law or the articles for the management of the business and conduct of the affairs of the corporation. Such a provision would clearly be "for the management of the business" and no provision of the GCL explicitly forbids such a limitation. However, Section 601(a) provides that notice of an annual meeting must include "those matters that the board, at the time of the mailing of the notice, intends to present for action by the shareholders, but subject to the provisions of subdivision (f) [requiring notice of the general nature of certain types of proposals] any proper matter may be presented at the meeting for that action" (emphasis added).