Shareholder activist John Chevedden rode the subway to the DreamWorks Animation shareholder meeting in Hollywood, Calif., last May. Reuters
WASHINGTON—A shareholder activist who has spent decades pressuring large corporations to change their governance and pay practices is coming under attack from some of the companies he's targeting.
In recent weeks, John Chevedden has been sued by four companies— EMC Corp.EMC +0.97% , Express Scripts Holding Co. ESRX -1.19% , Omnicom Group Inc.,OMC -0.52% and Chipotle Mexican Grill Inc. CMG -0.08% —seeking to block his nonbinding proposals from receiving a shareholder vote.
Unlike hedge funds or billionaire investors that build significant stakes in a company and then agitate for change, Mr. Chevedden is a retired 68-year-old investor living near Los Angeles. He holds a small amount of shares in the companies he targets, at least the $2,000 minimum amount necessary to file shareholder proposals.
Mr. Chevedden and other activist shareholders say the companies' litigation is an attempt to prevent investors from going through the legitimate proxy process to generate support for nonbinding proposals.
"They just seem to want to stifle the shareholders and not give them a meaningful opportunity to make improvements," Mr. Chevedden said.
The companies suing Mr. Chevedden disagree, saying the sheer volume of his proposals causes him to make factual errors in supporting statements that should disqualify many of his submissions.
"Mr. Chevedden's proposal contained a number of materially false statements that would be misleading for shareholders," said Brian Henry, a spokesman for pharmacy-benefits manager Express Scripts. A federal court last month agreed the company could omit a nonbinding proposal calling for an independent chairman at the company.
Chipotle maintains in its lawsuit that Mr. Chevedden abuses the proxy process, in part because no other individual or institutional investor submits more proposals. The company filed suit against him and two other individuals he collaborates with on resolutions, James McRitchie and his wife, Myra Young. Mr. McRitchie said the suits are aimed at making small shareholders "think twice" before filing proposals.
The companies have some advocates on their side, including regulators who say the lawsuits reflect an effort to get a handle on an increasingly unwieldy proxy process.
"A company should be able to use all available means, including litigation, to fulfill its fiduciary duties to all shareholders by seeking to exclude improper proposals that are so often the work of a small minority of shareholders pursuing their own narrow interests," Daniel Gallagher, a Republican member of the Securities and Exchange Commission, said in a statement.
Two additional courts have sided with Mr. Chevedden, saying he represents little if any legal threat to the companies.
On Friday, a federal judge dismissed a suit filed by EMC, ruling the Massachusetts data-storage provider was unlikely to be harmed by a proposal for an independent board chairman as Mr. Chevedden had promised not to sue the firm if it omits his resolution. A spokesman for EMC said the firm is considering its options in light of the ruling.
In a separate case Tuesday, a federal judge in New York declined to allow advertising firm Omnicom Group to omit a measure boosting the confidentiality of shareholder-vote tallies. As in the EMC suit, the judge ruled Omnicom's threat of harm was remote. A spokeswoman for Omnicom declined to comment.
Chipotle's lawsuit, which is still pending, would block a proposal to ease the ability of shareholders to change the company's governing documents. A Chipotle spokesman declined to comment.
Supporters say Mr. Chevedden is a victim of his own success, noting that a significant portion of his proposals garner majority votes when put to shareholders. Of the 157 proposals he has filed since 2010 that have been voted on, 55 garnered majority support, according to data compiled by proxy adviser Institutional Shareholder Services Inc.
Mr. Chevedden has notched victories at companies like Occidental Petroleum Corp.OXY +1.23% , where 53% of shareholders backed a measure last year to ease their ability to replace directors or change corporate bylaws. The company opposed Mr. Chevedden's proposal last year but plans to back a similar resolution in the current proxy season.Hewlett-Packard Co. HPQ +1.49% amended its bylaws last fall to allow a majority of shareholders to change the company's governing documents after Mr. Chevedden filed a resolution on the issue. The amendment didn't require a shareholder vote.
The number of companies pursuing lawsuits to block shareholder proposals remains tiny, and so far they appear to be focused only on Mr. Chevedden. Companies generally try to thwart proposals they don't like by asking the SEC for permission to exclude such resolutions from their proxy materials. The SEC has allowed companies to exclude 215 proposals since 2006, about a third of which were filed by Mr. Chevedden, according to the Manhattan Institute.
—David Benoit and Liz Hoffman contributed to this article.