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March 17 — The Securities and Exchange Commission staff, in continuing to wrestle with a recommendation on the use of universal proxy ballots in corporate board elections, “foremost” is looking at the issue from the viewpoint of shareholders, a senior official said March 17.
“First, and foremost, we are looking at this issue principally from the point of view of the shareholder that wants to vote for the mix of directors that shareholders believe would best serve the company,” said Michele Anderson, associate director of the SEC Division of Corporation Finance. However, “we also are sensitive to the fact that control of the board of directors might be at stake.”
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 both management and shareholder director candidates in a contested election. Institutional investors have called on the SEC to require the mechanism, arguing that it would level the playing field for investors who can't attend shareholder meetings and who have to vote by proxy.
SEC Chairman Mary Jo White endorsed the rulemaking initiative last year.
Anderson, speaking at a Tulane University corporate law event in New Orleans, said the division also is considering whether the use of the universal proxy cards should be mandatory or optional, and under what circumstances.
In addition, the staff is mulling what the card should look like, and whether both sides must use an identical card or may tailor how the names of the candidates are presented, she said.
The SEC official didn't give a timeline for when the division's recommendation would be completed. She also said it is too early at this point to speculate whether the SEC ultimately would adopt a universal proxy ballot rule.
Anderson added that a proposal wouldn't be about favoring companies or dissident shareholders because it isn't clear who would benefit from universal ballots.
In a previous update on the rulemaking initiative, Anderson also noted that the staff is considering what kinds of “timing, filing or dissemination obligations” should be imposed on shareholders in order for them to use a universal ballot.
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