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s we approach the 2023 annual general meeting (AGM) season, we expect to see a number of developments driven by several factors:
• New rules issued by the Securities and Exchange
Commission (SEC) on universal proxy cards and executive pay versus performance.
• New SEC guidance on how it handles attempts by companies to exclude shareholder proposals from their proxy statements.
• An increase in shareholder activism activity. • Changes in Delaware corporate law. • New issues raised by shareholder proposal proponents.
UNIVERSAL PROXY CARDS
In late 2021, the SEC adopted new rules related to contested direc- tor elections that became effective on September 1, 2022. Tese universal proxy rules will significantly change the proxy mechan- ics for contested director elections—elections where one or more shareholders seek to unseat incumbent directors by nominating their own candidates. Tese new provisions do not apply if the only directors up for
election are the company’s nominees. Te universal proxy rules provide that each of the company’s and any dissident shareholder’s proxy card used to cast votes in a contested director election will now be required to include all director nominees up for election, rather than only those of the company or the dissident filing the proxy statement. Previously, the company and the dissident would send out
competing proxy cards. It was an all-or-nothing proposition—share- holders voted for either the company’s slate or the dissident’s slate. One could not mix and match in these battles of dueling proxy cards. Tat situation was in contrast to voting in person at a share-
holder meeting where a holder could vote for some management nominees and some dissident nominees. One of the SEC’s primary rationales in adopting the rule was to create consistency between proxy voting and in person voting by mandating a “universal” proxy card. All proxy cards must now list the same candidates. Universal proxy provides a dissident shareholder with a power-
ful way to draw attention to its candidates and makes it easier to vote for those candidates. And, unlike with “proxy access” bylaws, this can be done without needing to meet any share ownership thresholds or holding period requirements. Tere are, however, several requirements that must be satisfied
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Universal proxy provides a dissident shareholder with a powerful way to draw attention to its candidates and makes it easier to vote for those candidates.
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