Medical Committee for Human Rights v. SEC 432 F.2d 659 (D.C. Cir. 1970) Dow Chemical made napalm, which they sold to the US army who used it to burn things in Vietnam. MCHR was a Dow shareholder and objected to the use of napalm. They submitted a shareholder proposal to force Dow to stop selling napalm unless they received assurances that it would not be used to burn people. The Securities Exchange Act of 1934 (Rule 14a-8) says that any shareholder who meets the ownership requirements of the rule and who submits a proposal in a timely fashion and in proper form can have the proposal included in the company's proxy materials for a vote at the shareholder annual meeting. The directors refused to add MCHR's proposal to the proxy materials. MCHR sued. The directors argued that 14a-8(i)(7) provided and exception that said shareholder proposals did not have to be included if they were related to "ordinary business operations." The directors also argued that napalm sales represented only a tiny portion of their business and they didn't make any money on the sales, they just did it to be patriotic and support the Vietnam War. At the time there was another exemption allowing companies to exclude proposals that were related to political causes. Also 14-8(i)(5)) provided an exception that said shareholder proposals did not have to be included if they were not "significantly related" to company business. The Appellate Court found for MCHR. The Appellate Court found that the 14a-8(i)(7) was not relevant because Dow wasn't making the napalm in the course of ordinary business operations, but in spite of them. The Court felt that Dow had no legitimate business reason to make napalm, they were only doing it because of the personal politics of the directors. Therefore it wasn't the kind of day-to-day business decision that deserved deference. The Court found that the corporate proxy rules could not be used as a shield to isolate managerial decisions from shareholder control. The Court found that shareholder proposals are proper when they raise issues of corporate social responsibility or question the "political and moral predilections" of management.