So what does Gamco Asset Management Inc.’s experience tell us about proxy access?
Proxy access facilitates shareholders’ choice of directors by allowing them to include their candidates on the company’s proxy card. On Nov. 10, Gamco became the first shareholder to use the director-nomination process when it announced its nomination of former Goldman Sachs partner Lance Bakrow to the board of National Fuel Gas Co.
NFG argued that Gamco, through its “long advocated” position that NFG should spin off its utility business, had shown an intent to change or influence the company. In 2015, NFG shareholders rejected a Gamco shareholder proposal on the matter.
According to a Nov. 23 securities filing by NFG, Gamco founder and chief executive officer Mario Gabelli also previously commented that “proxy access was a friendlier approach than a proxy contest” at NFG.
NFG’s proxy access bylaws restrict use of the mechanism to investors that are “not advocating to change or influence control” of the company.
What does this all suggest? That companies likely will use their bylaws to resist proxy access nominations.
About 300 companies have proxy access bylaws. Most of these provisions restrict use of the mechanism to shareholders that have held at least 3 percent of the company’s shares for three years or longer. That in itself is a pretty high hurdle for most shareholders. A Council of Institutional Investors 2015 report on proxy access best practices found that even if the 20 largest public pension funds were to aggregate their shares, they wouldn’t meet most companies’ 3 percent criteria.
Most companies, like NFG, also have clauses requiring the nominating shareholder to represent that it didn’t buy its shares with the aim of influencing or controlling the company. This means that activist shareholders may have a hard time actually using proxy access at companies with which they have actively engaged.
It isn’t clear what was going on behind the scenes in the Gamco situation. The next shareholder that tries to nominate a proxy access candidate will further clarify how easy—or challenging—it is to use the mechanism.
On the other side of the coin, shareholder proponents suggesting tweaks in a company’s proxy access procedures recently have been successful with the Securities and Exchange Commission. Several companies, including Apple Inc. and Walt Disney Co., failed to garner staff approval to omit those resolutions. So, unless the proponents withdraw the proposal or the parties litigate, shareholders may be voting on these recommendations. Although the proposals are nonbinding, companies may have a hard time ignoring those that are supported by shareholders at the annual meeting.
In other words—proponents still can try to modify corporate proxy access bylaws to make them easier to navigate.
What is clear is that proxy access will remain a key topic of shareholder engagement going forward.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)