## Facts

- Mobil Corporation’s board appointed Suliman S. Olayan, a Saudi Arabian citizen, as a director in 1980.
- Irvin Rauchman, a Mobil shareholder, submitted a shareholder proposal for inclusion in Mobil’s proxy materials for the 1982 annual meeting under SEC Rule 14a-8(a).
- The proposal sought a bylaw amendment providing that citizens of countries belonging to OPEC are not qualified for election to, or membership on, Mobil’s board of directors.
- Rauchman’s supporting statement criticized Saudi Arabia’s use of oil and argued Mobil should not appoint citizens of OPEC countries to its board.
- Mobil omitted the proposal, relying on SEC Rule 14a-8(c)(8), which permits exclusion of proposals relating to an election for membership on the board.
- Mobil obtained an SEC staff no-action letter stating the proposal called into question Olayan’s qualifications for reelection and constituted an effort to oppose management’s solicitation on his behalf.
- Rauchman sued to compel inclusion of the proposal, asserting an implied private right of action under § 14(a) of the Securities Exchange Act of 1934 and SEC Rule 14a-8.
- The district court granted summary judgment for Mobil, concluding the proposal was excludable as election-related; Rauchman appealed.

## Issues

1. Whether Mobil could exclude the proposed bylaw amendment under SEC Rule 14a-8(c)(8) because it related to a director election by effectively opposing the reelection of a sitting director.
2. Whether summary judgment was proper where the proposal’s text and its practical effect on the reelection of a director were not disputed.

## Decision

- The Sixth Circuit affirmed summary judgment for Mobil.
- The court held the proposal was properly excluded under Rule 14a-8(c)(8) because it related to an election to office.
- The court treated the proposal’s practical effect as disqualifying Olayan from reelection, making it functionally an effort to oppose management’s solicitation on his behalf.
- Assuming an implied private right of action existed under § 14(a) and Rule 14a-8, Mobil still prevailed because the omission complied with the rule’s election-related exclusion.

## Legal Principles

- A company may omit a shareholder proposal from proxy materials if the proposal “relates to an election for membership on the company’s board of directors or analogous governing body.” (SEC Rule 14a-8(c)(8)).
- A proposal that calls into question a director’s qualifications for reelection, or would make a specific nominee ineligible to serve, relates to a board election and may be excluded.
- Courts may evaluate a proposal by its practical operation, not merely its wording, in determining whether it is election-related within Rule 14a-8(c)(8).

## Conclusion

Because the proposed bylaw amendment would have prevented a sitting director’s reelection and operated as opposition to management’s solicitation in the election process, it related to a director election and was excludable from Mobil’s proxy materials under SEC Rule 14a-8(c)(8).


Rauchman v. Mobil Corp., 739 F.2d 205 (6th Cir. 1984)