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By Yin Wilczek
March 9 — The Council of Institutional Investors urged the SEC, in the wake of its proxy voting roundtable, to make the requirement for universal proxies a rulemaking priority.
In a March 5 letter, CII said the rulemaking is broadly supported by the investor community, and would lower or eliminate impediments for investors to exercise their fundamental shareholder rights.
“Accepting those two criteria, there is little question that rulemaking to facilitate universal proxies should be given a high priority on the” Securities and Exchange Commission's agenda, said the letter, signed by CII General Counsel Jeff Mahoney.
SEC spokesman John Nester declined to comment on the correspondence or to provide updates as to what steps the commission expects to take going forward.
Under current state and federal requirements, investors voting by proxy—unlike investors who attend meetings in person—cannot “split their ticket” by picking and choosing between candidates on the management slate and those supported by shareholder proponents.
A universal proxy card would allow shareholders to choose among all eligible director candidates.
At the SEC's Feb. 19 proxy voting roundtable, institutional investor and corporate participants clashed over whether the commission should mandate universal ballots.
While corporate representatives and attorneys suggest that they would be costly and lead to more proxy fights, investors argued that they would level the playing field for shareholders that can't attend annual meetings.
CII petitioned the SEC in January 2014 to amend its proxy voting rules to eliminate the requirement to obtain a nominee's consent to be named on a proxy card in contested elections, and to allow shareholders to vote for their preferred combination of shareholder and management nominees on a single card.
However, universal proxies are not listed in the SEC's latest regulatory flexibility agenda or on the agency's list of long-term rulemaking items. However, SEC officials suggested in 2014 that although there is no active rulemaking on the matter, the staff still is thinking through ways in which the rules may be improved.
In its March 5 letter, CII argued that universal proxies would lessen investor confusion and lower voting costs.
CII also argued that it would not be difficult for the SEC to provide implementation guidance on the mechanics of the process. “The guidance might simply require that the cards ‘list the names of all director nominees clearly, equally in terms of form, and on the front of the proxy card,'” it said. It added that the SEC guidance may also “appropriately require that the nominees be grouped by slate.”
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CII's letter is available at http://www.sec.gov/comments/4-681/4681-7.pdf.
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