SandRidge First in U.S. to Let Activist Board Nominees on Ballot

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By Andrea Vittorio

Activist investor Carl Icahn’s bid to replace SandRidge Energy Inc.'s board is the first proxy contest in the U.S. to include both sides’ nominees on the same ballot.

SandRidge is using what’s known as a universal proxy card for its June 19 shareholder meeting that lets investors vote for a combination of seven director nominees from either the company or Icahn.

Normally, only investors who attend the meeting in person can mix and match. Those who vote by proxy must go with one board slate or the other.

Universal proxies have been tried before, but this is the first time the idea has gotten buy-in from both sides of a proxy contest at a U.S.-based company.

“Usually, when one party suggests a universal proxy card, the other side rejects it,” said Kai Liekefett, who leads the shareholder activism practice at Sidley Austin LLP.

Tactical Advantages

An activist confident that shareholders would support their bid to take over most or all board seats would generally prefer having a separate card showing only its candidates. Using a universal voting card instead could help a company keep at least some board seats.

“It all comes down to tactical advantages,” Liekefett, who used to represent SandRidge Energy, told Bloomberg Law.

The Securities and Exchange Commission proposed requiring a universal ballot when board seats are contested, but the 2016 proposal fell off the SEC’s agenda after the Trump administration took office. The commission’s chairman, Jay Clayton, is considered unlikely to bring it back, though other companies could follow SandRidge’s lead and voluntarily adopt a universal ballot.

Still, it’s expected to remain a rare occurrence.

“It’s still very new,” said Amy Borrus, deputy director of the Council of Institutional Investors, which has pushed the SEC to make universal ballots mandatory. “The more universal proxies are used, the more they’re likely to gain acceptance.”

Dueling Proxy Cards

This isn’t the first universal ballot for Icahn, who previously used one at Transocean Ltd., a Swiss company, in 2013. The billionaire activist cheered the SEC’s universal ballot proposal when it was released, saying it could end some of the “gamesmanship” that companies use to keep shareholder-nominated directors out of the boardroom.

Even with a universal proxy card at SandRidge, Icahn has put out his own card that he wants investors to use instead. He’s urging them to “rip up” the company’s card, which recommends investors vote for two of Icahn’s seven nominees that it deems independent.

Michael Bennett, who leads SandRidge’s board, said its decision to use a universal ballot reflects the company’s commitment to “good governance.”

“We recognize the benefit of independent shareholder representation on the board and fully support shareholders’ ability to elect those candidates they believe will best represent their interests,” Bennett said in a May 7 statement announcing the universal proxy card.

SandRidge, which has seen its shares plummet since a 2016 bankruptcy, had offered to put two Icahn nominees on its board. Icahn, the company’s top shareholder, rejected that offer in his push to replace the entire board. He didn’t return a request to comment for this story.

To contact the reporter on this story: Andrea Vittorio in Washington at avittorio@bloomberglaw.com

To contact the editor responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com

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