The staff of the Corporation Finance Division has allowed Schering-Plough and JP Morgan Chase to omit a new bylaw proposal that seeks an independent lead director after rejecting requests by AT&T and Boeing to exclude the same resolution.

The proposal urges the companies to adopt a bylaw to require the board to have an “independent lead director whenever possible with clearly delineated duties” who would be elected by board’s independent board members and serve at least one year, unless the company had an independent chairman. The resolution listed a minimum set of duties, such as “serving as liaison between the chairman and the independent directors” and being available for consultation with “major shareholders.” The proposal specified that the standard of independence would be that of the Council of Institutional Investors (CII).

Shareholder William Steiner filed the resolutions at Schering and JP Morgan. Thomas Finnegan submitted the Boeing proposal, while Chris Rossi submitted a proposal at AT&T. All three investors are part of the network headed by shareholder activist John Chevedden of Redondo Beach, California.

Schering and JP Morgan argued that the proposal was “impermissibly vague and indefinite” and thus could be omitted under SEC Rule 14a-8(i)(3). The two companies asserted that the proposal’s reference to the CII’s independence standard was vague because the resolution did not provide details on the content of that standard. As Schering’s outside lawyers noted in their Jan. 28 “no action” request, the proposal could lead some investors to conclude “incorrectly” that the CII’s standard is the same as the New York Stock Exchange’s, whereas the CII’s current independence guidelines are “significantly more stringent.”

In response, Chevedden pointed out that shareholders “can easily access the widely known Council of Institutional Investors core definition of independence via the Internet,” and noted that the companies have encouraged investors to sign up to receive future proxy materials by e-mail or the Internet.

In letters issued in early March, the Corporation Finance staff agreed that the proposals could be excluded under Rule 14a-8(i)(3). The staff did not rule on the firms’ other arguments. Schering, a New Jersey-based drugmaker, asserted that the proposal would violate state law by granting too much power to a single director. JP Morgan argued that the proponent had failed to provide sufficient proof of stock ownership as required by Rule 14a-8(b).

On Feb. 19, the SEC staff turned aside AT&T’s request to omit the independent lead director proposal. The telecommunications company pointed out that it has “substantially implemented” the proposal by appointing a lead director who is independent under the NYSE’s standards. The company also argued that the proposal has false and misleading statements and that the proponent failed to provide sufficient proof of ownership.

One day later, the staff rejected Boeing’s request to exclude the lead director proposal. The Chicago-based aerospace firm challenged that proposal and three other resolutions filed by members of Chevedden’s shareholder network. The company unsuccessfully argued that Chevedden was improperly trying to circumvent Rule 14a-8(c), which permits an investor to file only one proposal per shareholders’ meeting. AT&T and Boeing did not make the argument raised by the two other firms under Rule 14a-8(i)(3) about the proposal’s failure to fully detail the CII’s independence standard.

In a “surprise reversal” for Chevedden’s investor network, the lead director proposal also will be on the ballot at P&GE, a San Francisco-based utility. The SEC originally granted the “no action” request by PG&E, which also argued that the proposal was vague because it failed to explain the CII’s definition of independence. Chevedden, in a March 14 letter on behalf of proponent Chris Rossi, asked the SEC to reconsider, noting that the company failed to send him a copy of its “no action” request. In a March 20 letter to the SEC, a PG&E lawyer acknowledged that its request letter “inadvertently was not delivered to Mr. Chevedden in a timely manner.” Accordingly, the company said it would drop its challenge and include Rossi’s proposal in its proxy statement.