SEC Proposes Amendments to Require Use of Universal Proxy Cards

 

On Oct. 26th, The Securities and Exchange Commission voted to propose amendments to the proxy rulesto require parties in a contested election to use universal proxy cards that would include the names of all board of director nominees. The proposal gives shareholders the ability to vote by proxy for their preferred combination of board candidates, similar to voting in person.

The proposed changes would allow shareholders to vote by proxy in a manner that more closely replicates how they can vote in person at a shareholder meeting,” said SEC Chair Mary Jo White.  “This change would allow shareholders through the proxy process to more fully exercise their vote for the director nominees they prefer.

The proxy rules would require public companies to include director candidates nominated by a dissident shareholder on the same ballot as the directors nominated by the company’s management.

The public comment period will remain open for 60 days following publication of the proposing release in the Federal Register.

Highlights

  • Proposed amendments would require public companies to include dissident nominees on same proxy card as management nominees in contested elections—a universal proxy card

  • Amendments would reduce disparity between choices shareholders can make in person at a shareholder meeting and choices currently available under proxy rules

  • Dissident nominees would only qualify for inclusion on universal proxy card if dissident solicits votes from holders of at least a majority of the company’s voting shares

  • Because dissidents would be required to incur solicitation expenses to qualify to use universal proxy, the proposed amendments are not likely to replace or have much impact on proxy access, which does not require solicitation

  • Proxy cards would be required to include an “against” option when there would be a legal effect to that vote and to provide shareholders with the ability to “abstain” in a director election governed by a majority voting standard

  • Proposed amendments generally would not apply to registered investment companies, business development companies or foreign private issuers

  • Although uncertain, it is not likely that the proposed amendments would apply to the 2017 spring proxy season

  • The practical impact is uncertain, with no consensus among prognosticators as to whether adoption would increase the likelihood of proxy fights or affect their outcome

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Proxy Votes

Securities and Exchange Commission

SEC

Compliance

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