Twenty Years of Shareholder Proposals After Cracker Barrel: An Effective Tool for Implementing LGBT Employment Protections

“This employee is being terminated due to violation of company policy. The employee is gay.”

This was the reason Cracker Barrel stated for dismissing Cheryl Summerville, a cook for the restaurant chain, on her official separation notice. 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.” In the face of criticism and a boycott by various groups, namely, the Atlanta chapter of Queer Nation, the Company rescinded its policy; however, at the time of the statement, the fired employees had not been rehired. 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. 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.” The 1992 Cracker Barrel shareholder proposal was the first of its kind to raise the issue of LGBT employment protections —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.

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