October 6, 2017

Universal Proxy Card? ADP Says “No Thanks” to Activist

Last month, Pershing Square Capital asked ADP to use universal proxy cards in connection with their ongoing proxy contest. ADP rejected the request – which apparently came after it had already distributed proxy materials to its shareholders. This recent blog from Davis Polk’s Ning Chiu discusses the reasons for ADP’s decision. Here’s an excerpt:

Since universal proxy cards are not widely used by U.S. public companies and have never been used by a large-cap, broadly held company, the risk for shareholder confusion is great.  While the SEC has proposed rules for universal proxy cards, the rules have not been adopted and no procedures have been enacted to govern a contest where shareholders vote using such a card.

Trying out a new process for a company with a significant retail investor base of approximately 310,000 individual shareholders is particularly risky, and the existing “street name” structure also may not support universal proxies at this time.  In addition, both sides have already distributed proxy materials.  The use of a universal proxy card would require sending out new replacement materials, the implementation of new mechanics for collection and educating shareholders on the changes in voting procedures.

ADP concluded that all of these issues could lead to a more disruptive and complicated process that confuses investors who well understand and have long exercised the existing voting structures for proxy contests, and could ultimately interfere with the conduct of a fair election.

John Jenkins