Late last year, the Securities and Exchange Commission (SEC) approved amendments to the federal proxy rules to, among other things, mandate the use of a universal proxy card in public solicitations involving director election contests. On February 24, we hosted a webinar to discuss issues relating to universal proxy rules. Access the recording of the webinar here.

We provided an overview of the universal proxy requirement and proxy contests under the new regime during the webinar. We also discussed universal proxy’s influence on activist strategies and tactics and provided practical guidance on what companies should prepare now. Key insights from the discussion are highlighted below.

Summary of Universal Proxy Rule Changes

  • New Rule 14a-19 applies in contested director elections. It requires both the company and the dissident to name on their respective proxy cards all duly nominated director candidates, including its nominees, the other’s nominees, and any proxy access nominees. The universal proxy card allows shareholders to vote for any combination of duly nominated candidates rather than being limited to voting for nominees named only on the company’s slate or the dissident’s slate – not previously an option when voting by proxy.
  • The new rule provides nomination notices and filing deadlines for proxy statements, amends the bona fide nominee rule and eliminates the “short slate” rule.
  • These rules are effective for shareholder meetings held after August 31, 2022.

Proxy Access vs. Universal Proxy

How does this new universal proxy rule differ from the existing proxy access? The chart below provides a breakdown.

 

Key Actions Companies Should Take Now

  • Provide director education on these new rules in light of sea change from the existing framework.
  • Assess vulnerability to current activist campaigns, combined with ongoing shareholder outreach to maintain strong relations/credibility with the shareholder base and minimize the risk of potential dissidents.
  • Review advance notice bylaws to ensure robust safeguards and consider whether additional protections are warranted.

We welcome the opportunity to discuss any of these takeaways with you or other topics of interest. Should you have any questions or suggestions for future webinar topics, please feel free to reach out to one of our speakers.