September 25, 2018

Universal Proxy: Are Issuers Breathing New Life Into It?

We’ve previously blogged about media reports suggesting that the SEC has shelved its universal proxy proposal. On the other hand, this MacKenzie Partners memo says that the idea of a universal proxy gained traction during the 2018 proxy season & found support from an unexpected constituency – public company issuers themselves. Here’s the intro:

Despite recent reports that it has been shelved as an item on the SEC’s agenda, the universal proxy card, which makes it easier for shareholders to pick-and-choose from a combination of management and dissident nominees in a proxy contest, found new life this year as it was used for the first time in a proxy contest involving a US-listed company, and was on the verge of being implemented in at least two other contests that were settled prior to the proxy being mailed.

The universal proxy card has long been a topic of discussion among regulators and industry practitioners, and it looked like the initiative had gained sufficient traction in October 2016 as then-SEC Chair Mary Jo White proposed a new rule on the issue. However, the new SEC administration had reported put the universal proxy on the back burner and shifted its attention towards other rulemaking initiatives.

It is somewhat surprising, then, that the private ordering that occurred this year primarily emanated from issuers rather than activists, who have historically been more outspoken in their support of the universal proxy. A closer look at these situations confirms what we have suspected for some time: that the universal proxy card can, in certain situations, be more advantageous for issuers than for activists.

The memo reviews the situations in which universal proxy cards were us – or almost used – and discusses the reasons why issuers may find it an attractive alternative in a proxy fight.

By the way, this recent blog from Cooley’s Cydney Posner suggests that those media reports about universal proxy’s demise at the SEC just may have been exaggerated.

John Jenkins