Activists Would Get Boost From SEC Proxy Voting Proposal

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By Rob Tricchinelli and Andrea Vittorio

Oct. 26 — Activist-backed candidates would have an easier time getting onto corporate boards under an Oct. 26 proposal from the Securities and Exchange Commission (RIN: 3235-AL84).

The agency's proposal, backed by a 2-1 vote, would require “universal” ballots showing all director candidates in contested elections so that shareholders who vote by proxy can split their tickets between management- and investor-backed nominees.

Currently, shareholders who don't vote in person must choose between the two slates.

“These changes would allow shareholders to choose individual director nominees whom they believe represent the best mix of skills and qualifications to run their company without being needlessly confined to an all-or-nothing vote on slates of nominees chosen by management or dissidents,” SEC Chairman Mary Jo White said at an Oct. 26 commission meeting in Washington.

`Ultimate Losers.'

Commissioner Michael Piwowar dissented, warning the proposed changes would empower activists and lead to more proxy fights. “The ultimate losers in these fights will be the public shareholders of these companies,” he said at the meeting.

The SEC's chief economist Mark Flannery said the proposal isn't intended to benefit either management or dissidents. But even if it does change board composition and shareholder influence, it isn't clear how that would ultimately impact a company's performance, he said at the meeting.

Republican lawmakers have tried to block agency action on universal ballots through a rider to a federal spending bill (132 CARE, 7/11/16).

The commission's proposal also sets out notice requirements and filing deadlines for proxy contestants. The proposed changes include a minimum solicitation requirement under which dissidents would be required to solicit shareholders representing at least a majority of the voting power of shares that can be voted at the election. The public has 60 days to weigh in on the proposed changes after they are published in the Federal Register.

To contact the reporter on this story: Rob Tricchinelli in Washington at rtricchinelli@bna.com; Andrea Vittorio in Washington at avittorio@bna.com

To contact the editor responsible for this story: Yin Wilczek at ywilczek@bna.com

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