The SEC reopened the comment period for Universal Proxy Rules and accepted comments until June 7th, 2021. The reopened comment period is regarding the Commission’s proposal of amending the proxy rules to permit shareholders to vote by proxy for any combination of candidates for the board of directors, as they could if they attended the shareholder meeting in person and cast a written ballot. The proposed rules would establish new procedures for the solicitation of proxies, the preparation and use of proxy cards, and the dissemination of information about all director nominees in contested elections.
There have been many comments sent to Vanessa A. Countryman, Secretary of the U.S. Securities and Exchange Commission addressing concerns on the policy. Sidley, ranked as the No. 1 legal advisor to companies in proxy contests in 2020, suggested that the shareholder hold at least 3% of the total voting power of a registrant’s securities for at least three years access the universal proxy card.
Sidley further outlines specific precedents and obligations that needed to be met by the shareholder to vote by proxy to occur. The legal advisory group also sets expectations for deadlines of when a shareholder should submit names for a proxy and support a change to the definition of a bona fide nominee.
The letter goes into further detail about their concerns and can be accessed here. Further, in summary, Sidley compiled a chart to show the inconsistencies between Rule 14a-8 and vacated Rule 14a-11 (and most proxy access bylaws), on the one hand, and the Proposed Rule on the other down below.
Having been involved in over 85 proxy contests in the past five years, more than any
other law firm representing companies, Sidley believed that their experience provided useful perspectives on legal, procedural, and practical considerations related to the Proposed Rule.
Another commenter, CalPERS, the California Public Employees’ Retirement System, are pleased that, in addition to requiring universal proxy cards in all non-exempt solicitations in contested elections, the proposed amendments would revise and expand the definition of a “bona fide nominee” under Rule 14a-4(d) to include all director nominees on universal proxy cards.
As the largest defined benefit plan public pension fund in the United States, distributing nearly $25.8 billion annually in retirement benefits to more than two million members, CalPERS believes that proxy systems are vital for shareowners of public companies to exercise their voting rights. They use the proxy voting system to exercise voting rights efficiently and consistently with their Investment Beliefs, Governance and Sustainability, Principles, Proxy Voting Guidelines, and internal policies.
In fact, CalPERS has adamantly expressed its support for a universal proxy card as well as changes to the definition of a “bona fide nominee” since 2015. They submitted a letter to the SEC in 2015 and 2017 during the original request to comment on the universal proxy.
Since the publication of the Proposed Rules in 2016, the SEC believes there have been important developments in proxy contests, corporate governance, and shareholder activism. As seen from the comments left by Sidley and CalPERS, voting by proxy has increased and needs up-to-date regulation and procedure. It will be interesting to see what will come out of the comments and suggestions sent to the SEC.
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