Twenty years of shareholder proposals after Cracker Barrel: an effective tool for implementing LGBT employment protections.

• Author: Rane, Neel

INTRODUCTION I. LGBT WORKPLACE DISCRIMINATION: PROBLEMS AND SOLUTIONS A. Prevalence of LGBT Workplace Discrimination B. Statutory Solutions to LGBT Workplace Discrimination 1. Federal Approaches 2. State and Local Approaches C. Corporate Nondiscrimination Policies II. SHAREHOLDER PROPOSALS A. Shareholder Proposals Generally B. Requirements for Submitting a Shareholder Proposal C. Excluding a Shareholder Proposal from the Proxy Materials D. Literature on Shareholder Proposals III. LGBT-NONDISCRIMINATION-POLICY SHAREHOLDER PROPOSALS, 2005-2012 A. Methodology and Overview of Sample 1. Sources of Shareholder Resolutions 2. Attributes of Shareholder Resolutions 3. SEC No-Action Letters B. Analysis of Shareholder Proposals 1. Proponents of Shareholder Resolutions a. Shareholder Proponents of LGBT-Inclusive Resolutions b. Shareholder Proponents of LGBT-Exclusive Resolutions 2. Content of Proposals 3. Outcomes of Shareholder Resolutions 4. Voting Statistics for Shareholder Proposals IV. ARGUMENTS FOR AND AGAINST PROPOSALS BY SHAREHOLDER PROPONENTS AND COMPANIES A. LGBT-Inclusive Resolutions 1. Arguments Advanced by Shareholder Proponents in Favor of LGBT-Inclusive Resolutions a. Peer Influence b. Public Opinion c. Employee-Focused d. Company-Focused 2. Companies' Responses Against LGBT-Inclusive Resolutions a. Unnecessary to Revise Existing EEO Policy b. Company Complies with the Requirements of Federal Law c. Lack of Shareholder Support d. Other Responses 3. SEC Response to LGBT-Inclusive Resolutions a. Failed Arguments for Excluding LGBT-Inclusive Proposals b. Successful Arguments for Excluding LGBT-Inclusive Proposals B. LGBT-Exclusive Resolutions 1. Arguments Used by Shareholders for LGBT-Exclusive Resolutions a. Sexual Orientation Is a Private Matter b. The Company Should Not Provide Benefits to LGBT Individuals or Their Partners c. Society Has Traditionally Discouraged or Prohibited Same-Sex Relations 2. Companies' Responses Against LGBT-Exclusive EEO Policies a. Implementing an LGBT-Exclusive EEO Policy May Spark Litigation Against the Company b. Implementing an LGBT-Exclusive EEO Policy Would Harm the Company's Business c. Other Arguments 3. SEC Responses to LGBT-Exclusive Resolutions CONCLUSION

INTRODUCTION

"This employee is being terminated due to violation of company policy. The employee is gay." (1)

This was the reason Cracker Barrel stated for dismissing Cheryl Summerville, a cook for the restaurant chain, on her official separation notice. (2) Cracker Barrel fired as many as sixteen employees pursuant to a company policy, promulgated in January 1991, stating that it was "inconsistent with [Cracker Barrel's] concept and values and ... with those of [its] customer base, to continue to employ individuals ... whose sexual preferences fail to demonstrate normal heterosexual values which have been the foundation of families in our society." (3) In the face of criticism and a boycott by various groups, namely, the Atlanta chapter of Queer Nation, the Company rescinded its policy; however, at the time of the statement, the fired employees had not been rehired. (4) Concerned about the impact of the adverse public reaction on Cracker Barrel's sales, the New York City Comptroller's and Finance Commissioner's offices, as trustees of several of the city's pension funds that collectively owned about $ (3) million of Cracker Barrel stock, submitted a shareholder proposal on behalf of the New York City Employees' Retirement System, requesting that the company formally prohibit discrimination based on sexual orientation. (5) In a no-action letter, "the [SEC] not only agreed that the proposal could be excluded" from the company's proxy materials but also outlined a new standard--the "Cracker Barrel Standard"-- which dictated that employment-based shareholder proposals would "always be excludable by corporations," even if they implicated "significant social policy issues." (6) The (1992) Cracker Barrel shareholder proposal was the first of its kind to raise the issue of LGBT employment protections (7)--after the SEC's no-action letter, it could have been the last. However, almost twenty years after the SEC's decision, the use of shareholder proposals to garner workplace protections for LGBT individuals has been extraordinarily successful.

This Comment explores the use of shareholder proposals for implementing reforms of corporate nondiscrimination policies as they affect LGBT employees. It argues that, particularly in the absence of comprehensive statutory employment protections for LGBT individuals, shareholder proposals have been an extremely effective tool for activists and interested shareholders to effect employment protections for LGBT employees.

Part I provides background on the extent of LGBT workplace discrimination and solutions promulgated to address the problem, including statutory measures and corporate nondiscrimination policies. Part II explains the history and use of shareholder proposals to garner LGBT employment protections. Part III describes the shareholder proposals filed between 2005 and 2012 that sought to either add or remove LGBT employment protections. Lastly, Part IV outlines the arguments typically used by shareholder proponents of proposals seeking to add or remove LGBT employment protections and the SEC's historical treatment of such proposals.

1. LGBT WORKPLACE DISCRIMINATION: PROBLEMS AND SOLUTIONS

   1. Prevalence of LGBT Workplace Discrimination

      LGBT individuals have faced a long and pervasive history of discrimination in society, particularly in the workplace. A 2012 study consolidating the findings of surveys, experiments, courts, administrative agencies, and legislatures on LGBT employment discrimination found the following:

      * "As recently as 2008, the General Social Survey found that of the nationally representative sample of LG people, 37 percent had experienced workplace harassment in the last five years, and 12 percent had lost a job because of their sexual orientation;" (8)

      * "As recently as 2011, 90 percent of respondents to the largest survey of transgender people to date reported having experienced harassment or mistreatment at work, or had taken actions to avoid it, and 47 percent

      reported having been discriminated against in hiring, promotion, or job retention because of their gender identity;" (9)

      * Numerous reports of employment discrimination against LGBT people have been found in court cases, state and local administrative complaints, complaints to community-based organizations, academic journals, newspapers and other media, and books; (10) and

      * Discrimination and harassment in the workplace can have a negative impact on the wages and mental and physical health of LGBT people. (11)

   2. Statutory Solutions to LGBT Workplace Discrimination

      1. Federal Approaches

         Despite the prevalence of LGBT workplace discrimination, efforts to develop a federal statutory approach have been largely unavailing. There is currently no federal statute explicitly prohibiting employment discrimination based on sexual orientation or gender identity. (12) Title VII of the Civil Rights Act of 1964 prohibits employment discrimination based on "race, color, religion, sex, and national origin." (13) Since the Supreme Court's decision in Price Waterhouse v. Hopkins that established gender stereotyping as actionable sex discrimination under Title VII, (14) some lower federal courts have begun to extend this holding to offer Title VII protections to LGBT individuals. (15) However, such an interpretation has not been uniform among the federal circuits. (16)

         "[F]ederal legislators have [unsuccessfully] sought to enact explicit protections for lesbian and gay workers consistently since 1973, introducing bills in [nearly] every Congress since 1994." (17) The current version of the proposed Employment Non-Discrimination Act of 2013 (ENDA), (18) which was first introduced in 1994, would extend current federal employment protections to individuals on the basis of sexual orientation and gender identity, with exceptions for religious organizations and small businesses (those with fewer than fifteen employees). (19) In 2007, a version of the bill, which only offered protections for sexual orientation, passed in the House but failed in the Senate. (20) The current version of the bill, which includes protections for transgender individuals, passed in the Senate on November 7, 2013, and, at the time of publication, is under review by the House Subcommittee on Workforce Protections. (21)

      2. State and Local Approaches

         Despite the absence of comprehensive federal protections, many state and local governments have passed laws offering employment protections to LGBT employees in their jurisdictions. As of June 2013, seventeen states and the District of Columbia prohibited discrimination based on sexual orientation and gender identity, and four states prohibited employment discrimination based on sexual orientation alone. (22) As of 2012, of the states that did not offer statutory protection for both sexual orientation and gender identity, eleven had gubernatorial executive orders that "prohibit[ed] discrimination on either or both bases against state employees," though these executive orders "provide[d] limited enforcement opportunities and lack[ed] permanency." (23) In addition to statewide employment protections, by (2012), at least (200) cities and counties prohibited employment discrimination based on sexual orientation, gender identity, or both. (24)

         State and local laws, however, are limited in their ability to fully protect LGBT employees. First, local resource and capacity constraints may limit enforcement of such laws. (25) Second, state and local laws have also been highly vulnerable to repeal. (26) For example, "[i]n (2011), the Tennessee legislature passed a law prohibiting local governments from adopting broader antidiscrimination ordinances or policies than provided for by state law." (27) This law...