(The article featured below is a selection from Federal Securities Law Reporter, which is available to subscribers of that publication.)

Staff Reverses Position on Livestock Antibiotics Proposals

The SEC’s Division of Corporation Finance has reversed its earlier view that Tyson Foods, Inc. may omit a shareholder proposal relating to the use of antibiotics in raising livestock. The staff initially advised that Tyson could omit the proposal from its proxy materials in reliance on the ordinary business exclusion. However, after reconsideration, the staff concluded that the widespread public debate about antimicrobial resistance and the use of antibiotics in raising livestock raises significant policy issues and cannot be considered part of a meat producer’s ordinary business operations.

The shareholder proposal was submitted by Trinity Health and the Adrian Dominican Sisters for consideration at Tyson’s 2010 meeting of shareholders. Tyson asked the SEC to concur that the proposal could be omitted under Rule 14a-8(i)(7) because it related to ordinary business operations.

The proponents sought reconsideration of the staff’s decision based on their belief that the staff had failed to recognize the significant policy issue presented by their proposal. In their view, the staff failed to see the larger public health issue and instead focused on the choice of production methods.

The proponents repeated their previously submitted evidence to support the view that the use of antibiotics in raising livestock raises significant policy issues, including scientific studies, calls for reform by the Food and Drug Administration and other respected organizations, and the ban on the use of nontherapeutic antimicrobials in the European Union. The proponents included new data on media coverage about the issue.

Tyson asked the staff to deny the proponents’ request for reconsideration by arguing that they failed to raise any additional substantive issues. Tyson said that it is actively working with producers and industry trade groups to ensure that its antibiotic use is properly managed. Tyson’s hog production operations use only antibiotics that have been approved by the FDA and they are administered by a licensed veterinarian in compliance with FDA protocols, according to its counsel.

Tyson said the proposal was excludable because it relates to ordinary business activities, interferes with management’s ability to run the day-to-day operations and would allow the shareholders to micromanage the company. Tyson also argued that the proposal did not involve a matter of substantial importance and that it was neither novel nor complex, standards which the staff applies in requests for Commission review.

The staff noted that two no-action responses in 2002 and 2003 permitted companies to rely on Rule 14a-8(i)(7) to exclude comparable proposals relating to the use of antibiotics in livestock production, but said those positions should now be reversed. In reaching this decision, the staff referred to the European Union’s ban on the use of most antibiotics as feed additives and the introduction by Congress of legislation to prohibit the nontherapeutic use of antibiotics in animals absent certain safety findings.

In reaching its initial decision, the staff did not address an alternative basis for exclusion of the proposal upon which Tyson wished to rely. Tyson believed the proposal could be excluded under Rule 14a-8(i)(11) because of the submission of identical proposals by the two proponents. The staff noted that Tyson received one of the proposals before the other, but Trinity Health intends to cosponsor the proposal submitted by the Adrian Dominican Sisters. Accordingly, the proposal may not be excluded under Rule 14a-8(i)(11).

□ Tyson Foods, Inc. (Adrian Dominican Sisters) (SEC) and Tyson Foods, Inc. (Trinity Health) (Recon.) (SEC) will be published in a forthcoming Report.