A paper by the Harvard Law School Program on Corporate Governance offers the first empirical analysis of proxy contests and the potential impact of universal proxies, and concludes that a universal proxy rule is unlikely to strongly favor either companies or dissidents. In fact, it would have slightly favored management nominees if it had been used at the proxy contests reviewed in the paper.
The use of separate proxy cards by contestants limits shareholders’ ability to select the candidates of their choice. As a result, the study concludes that 22% of proxy contests at large U.S. companies between 2008 & 2015 may have had “distorted outcomes” – meaning that another candidate may have been elected if universal proxies were used:
Of the 17 contests examined, the study shows that 14 involved distorted choices between sides, and that eight favored dissidents. This means, using the study’s assumptions, that a universal proxy rule would have instead favored management nominees in those cases. The imbalance is slight, however, which leads the study to conclude that universal proxies are unlikely to overwhelmingly benefit one side or the other. In 11 of the 17 contests, there may have been a distorted choice within sides, and a number of those seem to involve either the CEO or the chairman.
One limitation of the study is that it did not cover small cap companies – which is where most of the action is when it comes to proxy fights.
– John Jenkins