In a rare move, the staff of the Securities and Exchange Commission has reversed course on a no-action request, clearing the way for Navistar shareholders to vote on a Teamsters' proposal related to golden parachute agreements.

The proposal urges the board to adopt a policy of obtaining shareholder approval for future severance agreements that contemplate paying out more than two times the sum of an executive's base salary plus bonus. Navistar had argued that a Dodd-Frank mandated shareholder say-on-pay vote would substantially implement the proposal's objective. The SEC staff agreed, and granted Navistar no-action relief allowing it to exclude the proposal from its proxy materials in a Dec. 8 letter.

The Teamsters then requested reconsideration of the staff determination, citing Congress' explicit intent that the new financial reform requirements not preclude shareholders from taking action on specific elements of executive pay. The union argued that a shareholder vote on future executive severance agreements is different from a say-on-pay vote on the executives' current compensation plan. The SEC staff granted the request and overturned its ruling in a Jan. 4 letter.

“Navistar does not appear to have a policy of having to obtain shareholder approval for future severance agreements,” the letter states. “Accordingly, we do not believe that Navistar may omit the proposal from its proxy materials in reliance on rule 14a-8(i)(10).”

“We're aware of the decision, we disagree with it,” Navistar Corporate Secretary Curt Kramer says. “It's unfortunate that we found out on such short notice.”

As highlighted in Navistar's response to the union's request for appeal, the staff rarely grants requests for review and changes its mind even less often. The SEC received fewer than 10 requests for review out of more than 300 non-action letters during the 2010 proxy season, and denied all of them, according to the letter. Based on its review of no-action letters over the past 20 years, Navistar said the staff has only reversed its decision on three occasions.

In 2009, Navistar modified its golden parachute agreements, increasing chairman and CEO Daniel Ustian's cash severance formula from two to three times the sum of his base salary plus bonus—an estimated $7.4 million cash payout excluding other benefits that the union says brought the total to $24.2 million. Navistar's board also raised Ustian's 2010 annual incentive award and gave him a discretionary $1.9 million cash bonus.

The Teamsters filed the same proposal at Coca-Cola Enterprises, which petitioned the SEC for no-action to omit the golden parachutes proposal from their proxy materials based on the initial Navistar decision, says Louis Malizia, assistant director in the Teamsters Capital Strategies Department. “We are confident the SEC will follow its reversal on Navistar and not grant CCE no-action,” Malizia says.