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The Securities and Exchange Commission’s (SEC) proposed rule changes for the use of universal proxy cards in all non-exempt solicitations for contested director elections has received mixed reactions from various big players.
Firms have begun to deliver their verdicts on the changes after the SEC reopened the comment period in April. The proposed amendments include requiring the use of universal proxy cards in all non-exempt director election contests, revising the consent required of a bona fide director nominee, and to eliminate the short slate rule.
Law firm Sidley Austin, which commonly represents companies, said the proposed rule is the equivalent of “proxy access on steroids” and that the rule would give “substantially” greater rights to shareholders. The firm did, however, recommend that the SEC revise its proposal to require a shareholder to have continuously held at least 3% of the total voting power of a registrant’s securities for at least three years to request the use of a universal proxy card.
Olshan Frome Wolosky, a law firm that primarily works with activists, highlighted that it initially provided comments back in 2017, when the ruling was first opened for comment the year prior. In its latest response it conveyed its “deep and fundamental concern” that the rules could give companies an unfair strategic advantage to dissidents in contested solicitations.
Elliott Management responded positively and said it agrees with key aspects of the proposed rule and believes introducing a universal proxy card for contested elections will “enhance the proxy system.”
Top proxy voting adviser Institutional Shareholder Services (ISS) was complimentary of the SEC’s decision to open the comment period again and “generally supports the proposal.” The proxy adviser said the current rules can impede shareholders’ ability to exercise their right to elect directors through the proxy process. “Thus, we support the mandatory inclusion of management and dissident nominees in a single proxy card,” ISS said.
Public pension fund California Public Employees’ Retirement System (CalPERS) said the proposed amendments would “level the playing field between shareowners and corporate directors by eliminating burdensome voting constraints and protecting the voting rights of shareowners who are unable to attend in-person meetings.”