October 26, 2016
The SEC voted 2-to-1 today on a proposal to implement a “universal proxy,” which would allow investors to vote on board of directors elections from one ballot inclusive of both shareholder- and management-proposed candidates.
According to SEC Chairman Mary Jo White, as reported by Reuters, “the ruling will ‘strike the appropriate balance’ between the rights of corporations and activists while improving the process overall.”
According to The Wall Street Journal, proponents believe that the status quo favors companies since most shareholders do not attend the annual meeting—currently, they can only vote on both management and shareholder ballots if they are there in person. Otherwise they have to choose. The proposal purports to open more choices for investors to mix and match nominees backed by activists or favored by management.
Agenda Week (subscription required) also reported that the SEC proposed requirements to format such universal proxy cards, requiring companies to include “against” or “abstain” options and explain what occurs in the case of a “withhold” vote.
Republican SEC commissioner Michael Piwowar provided the dissenting vote, concerned that the ruling would increase the likelihood of proxy fights.
The comment period will be open for 60 days.
In a recent issue of C-Suite magazine, TK Kerstetter weighed in on the possible unintended consequences of such a rule. This topic initially came to light in the summer of 2015, when Chairman White suggested that the agency was mulling it as a possibility.
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