SEC Staff Actively Mulling Issue Of Universal Ballots, Official Says

Stay current on changes and developments in corporate law with a wide variety of resources and tools.

By Yin Wilczek

April 9 — The Securities and Exchange Commission Division of Corporation Finance is preparing a recommendation to the commission on universal ballots, a senior official said April 9.

“The staff is actively looking at, if it were to work, how we think it should work and how would we implement that,” Corp. Fin. Chief Counsel David Fredrickson told the SEC's Investor Advisory Committee.

Fredrickson added that among other issues, the staff is considering:

• do both parties have to use the same proxy card?

• should universal ballots be optional or mandatory in contest situations?

• what eligibility is necessary to either use the card or appear on it? and

• how to coordinate state cumulative voting practices with a universal ballot card.

Speaking at the IAC meeting in Washington, Fredrickson did not give a timeline as to when a recommendation may come. He said he voiced his own views, which did not necessarily reflect those of the commission or other staff members.

Pending IAC Recommendation 

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.

The IAC has a pending recommendation—issued in July 2013—that the SEC provide proxy contestants with the choice of using universal ballots in connection with short slate director nominations. More recently, the commission held a roundtable at which there was much debate about whether universal proxy cards should be mandated.

At the IAC meeting, Fredrickson told committee members that universal ballots and the matter of increasing retail shareholder participation in the proxy process—another topic addressed at the SEC roundtable—raise the question of “commission strategy.” Should the commission tackle the items on a piecemeal basis or deal with them holistically? he asked.

Roy Katzovicz, chief legal officer of Pershing Square Capital Management LP, and Steven Wallman, a former SEC commissioner who now is chief executive officer of Foliofn Inc., both warned that if the SEC waits to solve proxy problems holistically, it may never solve anything at all. Instead, the SEC should try to address “modular and standalone” issues where possible, Wallman suggested.

J. Robert Brown Jr., a law professor from the University of Denver, observed that roundtable participants focused on the “nuts and bolts” of universal proxy cards, but didn't go into the “fundamental question of whether” they should be instituted.

The implementation details shouldn't matter against the larger issue that all shareholders should be able to pick the director candidates they want, rather than be limited by proxy cards, Brown said. “So I hope there is a fundamental recognition” that that is the direction in which things should move.


In other discussions, Fredrickson said the commission is considering what it may do with respect to concerns that Broadridge Financial Solutions may be distributing preliminary voting results in a nonimpartial manner. There is a pending IAC recommendation that the SEC require brokers and their intermediaries to act “in an impartial and ministerial fashion throughout the proxy process, including the disclosure of preliminary voting information.”

Anne Sheehan, the California State Teachers' Retirement System's director of corporate governance who also chairs the IAC's Investor as Owner subcommittee, observed that CalSTRS, Broadridge and the Society of Corporate Secretaries and Governance Professionals are working on an agreement in which the pension fund may obtain certain information this proxy season.

However, Ann Yerger, executive director of the Council of Institutional Investors, said the “middle ground” of individual agreements is “inadequate.”

CalSTRS' three-way agreement with Broadridge and SCSGP has “heightened my concern about the voluntary approach,” Yerger told the committee. CII's “strongly held view is that this needs ultimately to be fixed by the commission.”

Brown suggested that even Broadridge would like the commission to clarify what it should do under the circumstances. “I think Broadridge” wants to do whatever it is legally required to do, he said.

Rule 14a-8(i)(9).

The IAC did not discuss proxy access and Corp. Fin.'s ongoing review of 1934 Securities Exchange Act Rule 14a-8(i)(9), which were listed on the meeting agenda. The provision allows companies to omit from their proxy materials shareholder resolutions that conflict with a management proposal.

Sheehan told the meeting that her subcommittee has not reached a consensus as to whether it will issue a recommendation on the matter. Should the subcommittee decide to issue a recommendation, it will be presented to the full committee at its July 16 meeting.

To contact the reporter on this story: Yin Wilczek in Washington at

To contact the editor responsible for this story: Ryan Tuck at


Request Corporate on Bloomberg Law