8-KCorporate ChangesOther EventsExhibits & Filings

CUMMINS INC 8-K Report, Bylaw Amendment (Oct 17, 2016)

Filed October 17, 2016For Securities:CMI

Summary

Cummins Inc. (CMI) filed an 8-K on October 17, 2016, detailing two significant amendments to its By-Laws. The first, effective immediately on October 11, 2016, modified the majority voting provisions for director elections. Under the new rule, an incumbent director who fails to receive a majority of "for" votes in an uncontested election will have their term automatically terminate at the shareholder meeting, a change from the previous 90-day grace period. Secondly, the Board approved amendments to introduce proxy access, which will be presented to shareholders for approval at the 2017 annual meeting. This proposal, a response to shareholder sentiment from the 2016 meeting, would allow qualifying shareholders (individually or in groups) owning at least 3% of outstanding common stock for at least three years to nominate directors. These changes reflect an effort to enhance corporate governance and shareholder engagement.

Key Highlights

  • 1Effective October 11, 2016, Cummins amended its By-Laws to implement an immediate termination of an incumbent director's term if they fail to receive a majority "for" vote in an uncontested election.
  • 2This change shortens the director resignation period from a previous 90-day window to automatic termination at the shareholder meeting.
  • 3The Board also approved Proxy Access amendments, subject to shareholder approval at the 2017 annual meeting.
  • 4Under the proposed Proxy Access, shareholders or groups owning at least 3% of common stock for three continuous years can nominate directors.
  • 5The shareholder group for proxy access nominations can include up to 20 individuals.
  • 6Nominees proposed through proxy access will be subject to various eligibility and procedural requirements, including ownership of shares with full voting and economic interest.
  • 7Proxy access will permit eligible shareholders to nominate up to 25% of the Board of Directors (or at least two directors if the Board has fewer than eight members).

Frequently Asked Questions

As of October 11, 2016, if a director running in an uncontested election does not receive a majority of "for" votes, their term automatically ends at the shareholder meeting where the vote took place. Previously, there was a grace period of up to 90 days.

Proxy Access is a provision that, if approved by shareholders at the 2017 annual meeting, will allow certain shareholders to nominate director candidates to be included in the company's proxy materials. The proposal is expected to become effective immediately following the 2017 annual meeting.

Shareholders, either individually or as a group of up to 20, must have continuously owned at least 3% of Cummins' outstanding common stock for at least three years. They must also have full voting and investment rights, as well as the full economic interest in the shares, with restrictions on borrowed or hedged shares.

Eligible shareholders will be able to nominate up to 25% of the Board of Directors. If the Board has fewer than eight directors, they can nominate at least two directors.