Amelia Roosevelt v. E.I. Du Pont De Nemours & Company

Opinion for the Court filed by Circuit Judge RUTH BADER GINSBURG.

Amelia Roosevelt appeals the district court’s judgment that E.I. Du Pont de Nemours & Co. (“Du Pont”) could omit her shareholder proposal from its proxy materials for the 1992 annual meeting. The district court concluded that Roosevelt’s proposal “deals with a matter relating to the conduct of [Du Pont’s] ordinary business operations,” and is therefore excludable under Securities and Exchange Commission (“SEC”) Rule 14a-8(c)(7), 17 C.F.R. § 240.-14a-8(c)(7). We affirm the district court’s judgment and deal first with a threshold question. Consistent with congressional intent and Supreme Court case law, we hold, a private right of action is properly implied from section 14(a) of the Securities Exchange Act of 1934 (the “Act”), 15 U.S.C. § 78n(a), to enforce a company’s obligation to include shareholder proposals in annual meeting proxy materials. Reaching the merits, we uphold the district court’s determination that Roosevelt’s two-part proposal is excludable under Rule 14a-8(c)(7).

I. Background

Prior to Du Pont’s 1991 annual shareholder meeting, Friends of the Earth Oceanic Society (“Friends of the Earth”) submitted a proposal, on behalf of Roosevelt, regarding: (1) the timing of Du Pont’s phase out of the production of chlorofluorocarbons (“CFCs”) and halons; and (2) the presentation to shareholders of a report detailing (a) research and development efforts to find environmentally sound substitutes, and (b) marketing plans to sell those substitutes. 1 Du Pont opposed inclusion of the proposal in its proxy materials; as required by SEC rule, see 17 C.F.R. § 240.14a-8(d), the company notified the SEC staff of its intention to omit the proposal and its reasons for believing the omission proper. Friends of the Earth *418 filed with the staff a countersubmission on Roosevelt’s behalf urging that the proposal was not excludable.

The SEC staff issued a “no-action letter”; citing the Rule 14a-8(c)(7) exception for matters “relating to the conduct of the [company’s] ordinary business operations,” 2 the staff stated that it would not recommend Commission enforcement action against Du Pont if the company excluded the proposal. Du Pont, SEC No-Action Letter (available March 8, 1991). Roosevelt did not seek Commission review of the staff’s disposition.

Instead, with the 1991 meeting weeks away, Roosevelt filed a complaint and a motion for a temporary restraining order in federal district court. Denying the motion, the motions judge stated preliminarily that “[t]he Supreme Court has recognized an implied private right of action for alleged violations of Rule 14a-8.” She found, however, that Roosevelt had not shown the requisite irreparable harm. If Du Pont mailed its proxy materials on March 18, as scheduled, without Roosevelt’s proposal, the motions judge observed, a supplemental mailing containing the proposal could still be made in advance of the April 24 annual meeting date. C.A. No. 91-556, Memorandum Order (March 18, 1991) at 1, 3. The trial judge held an expedited trial on the morning of April 2, 1991; in a Memorandum Opinion filed two days later, he ruled that, based on the “ordinary business operations” exception in Rule 14a-8(c)(7), Du Pont could omit Roosevelt’s proposal. C.A. No. 91-556, Memorandum Opinion (April 4, 1991) (“Mem.Op.”).

We expedited Roosevelt’s appeal when she informed us that she sought inclusion of her proposal in the proxy materials for Du Pont’s 1992 annual meeting. C.A. No. 91-5087, Order (April 9, 1991) (per curiam). Before the appeal was heard, Du Pont had again advised the SEC that it intended to exclude the proposal, and the SEC staff had issued a second no-action letter, once more concluding that “[t]here appears to be some basis for [Du Pont’s] view that the proposal may be excluded ... pursuant to rule 14a-8(c)(7).” Du Pont, SEC No-Action Letter (available Sept. 11, 1991). 3 Neither Roosevelt nor the SEC staff requested the Commission’s view on the applicability of the “ordinary business operations” exception to Roosevelt’s proposal. 4

II. The Implied Private Right of Action and Shareholder Proposals

Before reviewing the district court’s application of Rule 14a-8(c)(7), we resolve a preliminary question: Does a shareholder have an implied right of action under section 14(a) of the Act and Commission Rule 14a-8 when a company refuses to include the shareholder’s proposal in proxy materials?

*419 The existence of the right of action Roosevelt is pursuing was asserted by the motions judge, see supra p. 418, and assumed by all participants in these proceedings until Du Pont, in its answering brief on appeal, presented this boldface argument: “Congress Did Not Create A Private Right Of Action To Enforce The SEC Rule Governing Shareholder Proposals.” Brief for Appellee at 32. While it is not our practice to entertain issues first raised on appeal, we regard this case as exceptional. 5 Between the district court’s decision and our consideration of the appeal, a relevant Supreme Court decision intervened: Virginia Bankshares v. Sandberg, — U.S. —, 111 S.Ct. 2749, 115 L.Ed.2d 929 (1991). We follow the suggestion contained in Virginia Bankshares that, given the “state of evolving definition and uncertainty,” an appellate court appropriately answers, and does not bypass, a (preliminary) question of such “importance to the administration of federal law.” See 111 S.Ct. at 2761 n. 8.

A. Section 14(a) and Supreme Court Case Law on Implied Private Rights

A private right of action of the kind Du Pont shareholder Roosevelt asserts has been widely assumed, but scarcely addressed. See, e.g., Grimes v. Centerior Energy Corp., 909 F.2d 529 (D.C.Cir.1990) (right assumed without discussion), cert. denied, — U.S. —, 111 S.Ct. 799, 112 L.Ed.2d 860 (1991); Rauchman v. Mobil Corp., 739 F.2d 205, 207-08 (6th Cir.1984) (court assumed private action exists but had “substantial reservations”); Medical Comm. for Human Rights v. SEC, 432 F.2d 659, 671-72 (D.C.Cir.1970) (court stated “[tjhere is no doubt” that shareholder whose proposal was excluded could seek redress through private action), vacated as moot, 404 U.S. 403, 92 S.Ct. 577, 30 L.Ed.2d 560 (1972); cf. New York City Employees’ Retirement System v. American Brands, Inc., 634 F.Supp. 1382, 1386 (S.D.N.Y.1986) (“NYCERS”) (reasoned determination of existence of implied private right of action by shareholder to enforce company’s obligation, under section 14(a) of the Act and Commission Rule 14a-8, to include shareholder proposal in proxy materials). Because the question merits full airing, we have tried to consider it comprehensively.

The Supreme Court first recognized a private right of action under section 14(a) of the Act in J.I. Case Co. v. Borak, 377 U.S. 426, 84 S.Ct. 1555, 12 L.Ed.2d 423 (1964). Borak involved a merger allegedly infected by a false and misleading proxy statement. The plaintiff shareholder sought rescission or damages citing (1) section 14(a)’s proscription of proxy solicitation in contravention of Commission rules, 6 *420 and (2) Rule 14a-9’s ban on false or misleading statements in proxy solicitations. 7 The Court found it “clear” that section 27 of the Act afforded shareholders the requisite right to sue. Section 27 gives the federal district courts exclusive jurisdiction over violations of the Act and “of all suits in equity and actions at law brought to enforce any liability or duty created by [the Act] or the rules and regulations thereunder.” 8 Borak served as the pathmarking decision for the Court’s recognition of implied rights of action under section 14(a) and Rule 14a-9 in Mills v. Electric Auto-Lite Co., 396 U.S. 375, 90 S.Ct. 616, 24 L.Ed.2d 593 (1970), and later in TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438, 96 S.Ct. 2126, 48 L.Ed.2d 757 (1976).

Over the years since Borak, however, the Court has exercised greater restraint in the implication of private rights of action. Compare Cannon v. University of Chicago, 441 U.S. 677, 99 S.Ct. 1946, 60 L.Ed.2d 560 (1979), with Touche Ross & Co. v. Redington, 442 U.S. 560, 99 S.Ct. 2479, 61 L.Ed.2d 82 (1979). In Touche Ross, the Court unsettled one premise of Borak’s reasoning. “Section 27,” the Court said, is a prescription on federal court jurisdiction, venue, and service of process; it “imposes no liabilities” and “creates no cause of action of its own force and effect.” Id. at 577, 99 S.Ct. at 2489. Nonetheless, the Court preserved Borak’s core; it did not “question the actual holding of [the Bo-rak] case,” id., tied as it was to section 14(a) of the Act. See id. at 576, 99 S.Ct. at 2489.

Most recently, the Court refused to extend the Borak section 14(a)/Rule 14a-9 right of action to minority shareholders who lacked the votes needed to block the merger that gave rise to the claim. Virginia Bankshares, 111 S.Ct. 2749. The Court’s opinion in Virginia Bankshares recapitulates the Touche Ross main theme: “The ultimate question is one of congressional intent.” Touche Ross, 442 U.S. at 578, 99 S.Ct. at 2490. As restated in Virginia Bankshares:

The rule that has emerged in the years since Borak ... is that recognition of any private right of action for violating a federal statute must ultimately rest on congressional intent to provide a private remedyf.]

111 S.Ct. at 2763. The Court indicated a disinclination, however, to disturb a longstanding “legal structure of private statutory rights [that] has developed without clear indications of congressional intent.” Id. at 2764; cf. Franklin v. Gwinnett County Public Schools, — U.S. —, —, 112 S.Ct. 1028, 1030, 117 L.Ed.2d 208 (1992) (Court had “no occasion” to reconsider Cannon decision implying right of action and turned directly to “the question of what remedies are available” to redress the implied right). Again, the Court preserved Borak, Virginia Bankshares, 111 S.Ct. at 2764 n. 11, while noting “the hurdle facing *421 any litigant” seeking to extend an implied private right to a class with claims not comparable to those previously recognized. 111 S.Ct. at 2764.

We are satisfied on three critical points: first, section 14(a) supports Roosevelt’s right of action no less than it supports the right recognized in Borak; second, “it would be demonstrably inequitable to [shareholders] with claims comparable to those previously recognized” to deny the right to sue asserted here, see Virginia Bankshares, 111 S.Ct. at 2764; and third, such a denial would upset longstanding administrative arrangements and shareholder expectations.

B. Congressional Intent and Section 14(a)

Because of the primacy of the statutory text to any decision recognizing a private right of action, see Virginia Bankshares, 111 S.Ct. at 2764, we turn to section 14(a) and recall that Congress there entrusted to the SEC the prescription of rules and regulations governing proxy solicitations “in the public interest or for the protection of investors.” Section 14(a), the SEC judged in framing its rules, warrants the shareholder proposal right the Commission placed in Rule 14a-8. We agree. Access to management proxy solicitations to sound out management views and to communicate with other shareholders on matters of major import is a right informational in character, one properly derived from section 14(a) and appropriately enforced by private right of action. The right to be informed that Rule 14a-8 affirms is complementary to, although discrete from, the Rule 14a-9 ban on misleading statements in proxy solicitations, the right to accurate information on which the Court focused in Borak.

In Borak, the Court summarized section 14(a)’s legislative history and observed that it demonstrated Congress’ intent to bolster the intelligent exercise of shareholder rights granted by state corporate law:

[Section 14(a)] stemmed from the congressional belief that “fair corporate suffrage is an important right that should attach to every equity security bought on a public exchange.” H.R.Rep. No. 1388, 73d Cong., 2d Sess. 13. It was intended to “control the conditions under which proxies may be solicited with a view to preventing the recurrence of abuses which ... [had] frustrated the free exercise of the voting rights of stockholders.” Id., at 14.

377 U.S. at 431, 84 S.Ct. at 1559 (emphasis added; ellipsis in original). The Court explicitly linked the Rule 14a-9 informational right to the power to control corporate action: “The purpose of § 14(a) is to prevent management or others from obtaining authorization for corporate action by means of deceptive or inadequate disclosure in proxy solicitation.” Id. Based on this link, Borak implied a right of action from section 14(a); under the right implied, a court could award damages when approval for a merger had been obtained by means of a proxy statement that was misleading, and therefore violative of Rule 14a-9. The essential linkage was absent in Virginia Bankshares, the Court in that later case explained. Because the complaining shareholders in Virginia Bank-shares lacked the power to block the merger, the Court allowed no private right of action. 9

Congress, however, did not narrowly train section 14(a) on the interest of stockholders in receiving information necessary to the intelligent exercise of their approval rights under state law. Beyond that limited frame, section 14(a) shelters use of the proxy solicitation process as a means by which stockholders may become informed about management policies and may com *422 municate with each other. Referring to the House Report cited in support of the Borak cause of action, this court once commented: “It is obvious to the point of banality ... that Congress intended by its enactment of section 14 ... to give true vitality to the concept of corporate democracy.” Medical Comm., 432 F.2d at 676. The Senate Report similarly indicates this broader purpose: “In order that the stockholder may have adequate knowledge as to the manner in which his interests are being served, it is essential that he be enlightened not only as to the financial condition of the corporation, but also as to the major questions of policy, which are decided at stockholders’ meetings.” S.Rep. No. 792, 73d Cong., 2d Sess. 12 (1934). See also Business Roundtable v. SEC, 905 F.2d 406, 410 (D.C.Cir.1990) (quoting Senate Report).

In keeping with the Senate Report’s statement on section 14(a), the Commission has said of Rule 14a-8:

Recognizing that, with the increased dispersion of security holdings in public companies, the proxy solicitation process rather than the shareholder’s meeting itself had become the forum for shareholder suffrage, the Commission, since 1942, has provided security holders of public companies subject to its proxy regulations a right to have their proposals presented to the issuer’s security holders at large and to have proxies with respect to such proposals solicited at little or no expense to the security holder.

Proposed Amendments to Rule Ha-8, Exchange Act Release No. 19,135, 47 Fed. Reg. 47,420, 47,420-21 (Oct. 26, 1982) (footnote omitted). See also Medical Comm., 432 F.2d at 677 (noting Commission’s recognition that “corporate practice of circulating proxy materials which failed to make reference to the fact that a shareholder intended to present a proposal at the annual meeting rendered the solicitation inherently misleading”); NYCERS, 634 F.Supp. at 1386 (“Since a shareholder may present a proposal at the annual meeting [if state law so allows] regardless of whether the proposal is included in a proxy solicitation, the corporate circulation of proxy materials which fail to make reference to a shareholder’s intention to present a proper proposal at the annual meeting renders the solicitation inherently misleading.”). 10

Reminding us that Borak recognized a private right of action under section 14(a) as implemented by Rule Ha-9, Du Pont stresses that the more recent decisions (Touche Ross and Virginia Bankshares) counsel against continuing judicial implication of private rights. However, in view of the informational right rooted in section 14(a), we see no instruction in current Supreme Court opinions to “freeze out” private enforcement of Rule 14a-8, a prescription plainly serving the congressional aim to facilitate “corporate democracy.” See Virginia Bankshares, 111 S.Ct. at 2764 (acknowledging some leeway for “rounding out the scope of an implied private statutory right of action”).

We take into account as well the nature of the relief a Rule 14a-8 plaintiff-shareholder seeks — a declaration or injunction requiring inclusion of the shareholder’s proposal in the proxy materials mailed by management. Virginia Bankshares, by contrast, concerned damage awards for alleged Rule 14a-9 violations. In Virginia Bankshares as in Borak, the plaintiff sought damages, claiming that the merger was effected at an unfair price and that the price would have been better (or the merger would not have been approved at the unfair price) had the board of directors not made certain misrepresentations. The Court analyzed the claim in two steps. First, the Court asked whether the type of representation sued upon was within the ambit of section 14(a), see 111 S.Ct. at 2757-61, and concluded that it was. Second, the Court inquired “whether causation of damages compensable through the im *423 plied right of action under § 14(a) [could] be demonstrated,” see id. at 2761, and concluded that it could not. The Court rejected the plaintiffs’ damages claim based on the alleged “unfairness” of the merger because the complaining shareholders, under no circumstances, could have blocked the merger; therefore, the asserted section 14(a) informational injury and the injury sought to be redressed (through damages) did not mesh. Here, there is no linkage problem — a Rule 14a-8 plaintiffs informational injury (exclusion of her proposal) is precisely the injury that will be redressed by the requested declaratory or injunctive relief. 11

C. The SEC’s View of the Implied Right

The Commission’s view that a private right of action exists under section 14(a) and Rule 14a-8 as well as under Rule 14a-9 coincides with our reading of congressional intent. 12 In support of its view, the SEC refers to its long-standing practices and arrangements. We describe those practices and arrangements for the light they cast on the issue before us.

Staff review of proxy materials, including shareholder proposals, is a concentrated endeavor, based in large part on submissions received during the few months preceding the peak annual meeting season. The review is quick and informal; any advice given in this process is nonbinding for all concerned. See Statement of Informal Procedures for the Rendering of Staff Advice with Respect to Shareholder Proposals, Exchange Act Release No. 12,599, 41 Fed.Reg. 29,989, 29,991 (July 7, 1976) (“Informal Procedurest”); Brief of the Securities and Exchange Commission, Amicus Curiae, at 27 n. 22.

Shareholder proposals come to the SEC staff’s attention when an issuer, as required by Commission rule, notifies the Commission and the shareholder of the company’s decision to omit a tendered proposal and its reasons for the exclusion. See 17 C.F.R. § 240.14a-8(d)(4). Prior to deciding whether to issue a no-action letter, 13 the staff may receive submissions from the proposer or other interested persons. Roosevelt, for example, submitted supporting materials both times the staff reviewed her CFC phase-out proposal. Following staff action, either the company or the shareholder may ask for Commission review, but the SEC infrequently grants such requests. See Informal Procedures, 41 Fed.Reg. at 29,991 (observing that no prescription directs staff to present requests for review to the Commission). Because the procedure is advisory and yields no definitive ruling, neither the staff’s no-action letter, nor the Commission’s refusal to review the staff’s position, results in an order amenable to judicial review. See Kixmiller v. SEC, 492 F.2d 641 (D.C.Cir.1974) (dismissing petition to review Commission’s decision not to review staff’s no-action disposition); see also Heckler v. Chaney, 470 U.S. 821, 105 S.Ct. 1649, 84 L.Ed.2d 714 (1985) (courts generally lack authority to review agency’s enforcement agenda and resource-allocation decisions). 14

*424 The Commission has consistently regarded the court, and not the agency, as the formal and binding adjudicator of Rule 14a-8’s implementation of section 14(a). Thus, the staff routinely includes this notice in its responses to company requests for no-action letters:

The determination reached by the staff in connection with a shareholder proposal submitted to the Division [of Corporation Finance] under Rule 14a-8 does not and cannot purport to “adjudicate” the merits of the Company’s position with respect to the proposal. Only a court such as a U.S. District Court can decide whether a Company is obligated to include shareholder proposals in its proxy material. Accordingly, a discretionary determination by the staff not to recommend enforcement action to the Commission does not preclude a proponent, or any shareholder of a Company, from pursuing any rights he or she may have against the Company in court, should the management omit the proposal from the Company’s proxy material.

See also Informal Procedures, 41 Fed. Reg. at 29,990 (“[Njothing the Commission or its staff does or omits to do in connection with [shareholder] proposals affects the right of the proponent, or any shareholder for that matter, to institute a private action with respect to the management’s intention to omit that proposal from its proxy materials.”); id. at 29,991 (“The ultimate decision as to whether a shareholder proposal will be omitted from an issuer’s proxy materials must be made by the management, although ... that decision is subject to review by a district court [in an action] instituted by either the Commission or the proponent.”).

The Commission asks us

to take note of the Commission’s inability, with the hundreds of shareholder proposals the staff must review each year and all of the other demands on its limited resources, to enforce [compliance with section 14(a) as implemented by Rule 14a-8] effectively on its own, and the resulting need for supplementary private enforcement.

Brief of the Securities and Exchange Commission, Amicus Curiae, at 21; see also id. at 27 n. 22 (“staff [annually] considers approximately 350 requests for ‘no-action’ letters relating to shareholder proposals”; “approximately two-thirds of these requests require a response during the period December through March”). The SEC features, in this regard, the Supreme Court’s decision in Cannon, 441 U.S. 677, 99 S.Ct. 1946. There, in confirming the existence of an implied right of action under Title IX of the Education Amendments of 1972, 20 U.S.C. § 1681, the Supreme Court counted it persuasive that the Department of Health, Education, and Welfare viewed the private remedy as a vital aid in “achieving the statutory purposes.” Id., 441 U.S. at 706-08 & n. 42, 99 S.Ct. at 1962-64 & n. 42; see also id. at 702-03, 99 S.Ct. at 1960-61 (persistence among judges, executive officials, and litigants of assumption that implied private right of action exists, and “absence of legislative action to change that assumption provide further evidence that Congress at least acquiesces in ... that assumption”).

We place no heavy weight on the Commission’s plea that it needs the aid of the court because it is overburdened, for arguments springing from “necessity” will not overcome a negative answer to the question “whether Congress intended to create, either expressly or by implication, a private cause of action.” See Touche Ross, 442 U.S. at 575-76, 99 S.Ct. at 2488-89; Virginia Bankshares, 111 S.Ct. at 2764. We do credit, however, the SEC’s consistent interpretation of section 14(a) and Rule 14-8a’s implementation of the section. See United States v. National Ass’n of Securities Dealers, Inc., 422 U.S. 694, 719, 95 S.Ct. 2427, 2442, 45 L.Ed.2d 486 (1975) (SEC’s “consistent and longstanding interpretation” as “the agency charged with administration of the [Investment Company Act of *425 1940], while not controlling, is entitled to considerable weight.”). Furthermore, we accord due respect to the SEC’s experience in attempting to carry out the large, but largely undetailed, charge that Congress, through section 14(a), gave to the Commission. Cf . Virginia Bankshares, 111 S.Ct. at 2764 (where Congress “was reticent with indications of how far [statute’s protective purpose] might depend on self-help by private action,” the Court has “looked to policy reasons for deciding where the outer limits of the right should lie”); Skidmore v. Swift & Co., 323 U.S. 134, 140, 65 S.Ct. 161, 164, 89 L.Ed. 124 (1944) (noting that courts “may properly resort for guidance” to agency’s "body of experience and informed judgment”).

In sum, in view of Congress’ intent that section 14(a) have real force, relevant judicial precedent, and the agency’s view of the private right, we hold that shareholders may seek appropriate declaratory and in-junctive relief when management refuses to distribute their proposals.

III. Roosevelt’s Proposals and the Rule 14a-8(c)(7) Exception for “Ordinary Business Operations”

Reaching the merits, we restate the district court’s ruling: “Roosevelt’s proposal deals with matters relating to the conduct of the ordinary business operations of Du Pont. Therefore, [under Rule 14a-8(c)(7) ], Du Pont properly omitted her proposal from its proxy statement.” Mem. Op. at 1. In reviewing this ruling, we emphasize that Roosevelt’s disagreement with Du Pont’s current policy is not about whether to eliminate CFC production or even whether to do so at once. The former is an end to which Du Pont is committed, and immediate cessation, before environmentally safe alternatives are available, is not what Roosevelt proposes.

Roosevelt differs with Du Pont on a less fundamental matter — the rapidity with which the near-term phase out should occur. Roosevelt seeks a target no later than 1995 (“surpassing [Du Pont’s] global competitors which have set a 1995 target date”). In contrast, when this litigation began, Du Pont had set a target of “as soon as possible, but at least by the year 2000.” Mem. Op. at 4.

In recent months and days, the “at least by” year has moved ever closer to Roosevelt’s target. Prior to oral argument, Roosevelt informed the court, pursuant to Fed.R.App.P. 28(j) and D.C.Cir.R. 11(h), that Du Pont had issued a press release reiterating its “as soon as possible” policy, but “advancing the end point to year-end 1994 for Halons and 1996 for CFCs.” Du Pont Corporate News, Oct. 22, 1991, at 1 (citing “scientific data released today by the United Nations Environment Programme ... and World Meteorological Organization”). Following oral argument, Du Pont informed the court that, “[i]n response to an announcement issued by the White House today regarding an accelerated phaseout of CFCs and Halons,” the company “will accelerate its CFC end date to no later than December 31, 1995 in developed countries.” Du Pont Statement on Accelerated CFC Phaseout, Feb. 12, 1992. 15

Although the regulation necessary to give effect to the President’s announcement has not yet been adopted, Du Pont *426 immediately reported that it “supports the Administration’s position,” id., and that it will phase out CFC production by December 31, 1995. We accept that public statement as the company’s current timetable. While the SEC staff and the district court considered Roosevelt’s proposal with the company’s year-2000 end point in view, we think it proper to take account of the current reality: Roosevelt’s proposal would have Du Pont surpass its global competitors’ target of 1995; Du Pont projects completion of the phase out “as soon as possible,” but no later than year-end 1995.

Roosevelt has confirmed that the first, or phase-out portion of her proposal is the “core issue” and that, if necessary, she would withdraw the second, or report-to-shareholders portion, so that the first portion could be included in Du Pont’s 1992 proxy materials. Plaintiff-Appellant’s Reply to Brief of the Securities and Exchange Commission, Amicus Curiae, at 4-5. We therefore consider separately the two portions of Roosevelt’s proposal. 16

Because both parts of Roosevelt’s proposal must be measured against the Rule 14a-8(c)(7) “ordinary business operations” exception, we set out here the Commission’s general understanding of that phrase. When the Commission adopted the current version of the “ordinary business operations” exception, it announced its intention to interpret the phrase both “more restrictivefly]” and “more flexibly than in the past.” Adoption of Amendments Relating to Proposals by Security Holders, Exchange Act Release No. 12,999, 41 Fed. Reg. 52,994, 52,998 (Dec. 3, 1976) (“1976 Rule Ha-8 Amendments ”). Specifically, the Commission explained:

[T]he term “ordinary business operations” has been deemed on occasion to include certain matters which have significant policy, economic or other implications inherent in them. For instance, a proposal that a utility company not construct a proposed nuclear power plant has in the pas