Recently, a shareholder was the first to attempt to use proxy access bylaws to nominate a director. The shareholder was GAMCO Asset Management, and the company involved was National Fuel Gas Company (NFG).
NFG amended its bylaws in March 2016 to include a proxy access bylaw and its terms are pretty typical: the bylaws provide that a shareholder, or a group of up to 20 shareholders, owning 3% or more of the Company’s outstanding Common Stock continuously for at least three years may nominate and include in the company’s proxy materials directors constituting up to 20% of the board, provided that the shareholders(s) and the nominee(s) satisfy the bylaw requirements. Here is NFG’s proxy access bylaw.
In early November, GAMCO filed a Schedule 13D/A and a Schedule 14N announcing that it was using the proxy access bylaw to nominate a director candidate for election at NFG’s 2017 Annual Meeting. According to the 13D/A, GAMCO and its affiliates beneficially own in the aggregate approximately 7.81% of NFG’s Common Stock.
In response, NFG filed an 8-K on November 23 and rejected the nomination because GAMCO couldn’t make the representations required by the bylaw that the proxy access shares owned by the stockholder were acquired “in the ordinary course of business and not with the intent to change or influence control of the Corporation” and the stockholder “does not presently have such intent[.]” (Note: Most proxy access bylaws adopted today include this representation.) The 8-K is linked here.
In this Schedule 13D/A, filed on November 28, GAMCO reported that its nominee had “informed GAMCO this morning that he has decided to withdraw [his] name as a candidate for Director of National Fuel Gas Company. GAMCO will not pursue Proxy Access.” Therefore, this first attempt is now over, but it was interesting to see it unfold.
Looking for more analysis on this topic? You might be interested in reading Kevin Douglas’ article titled, “Should Public Cos. Voluntarily Adopt Proxy Access?”