July 11, 2019

Universal Proxies: Dissidents Win Board Control for First Time!

Here’s big news on the universal proxy front: yesterday, at EQT Corporation’s annual meeting, a dissident group won control of the company’s board through a proxy fight waged using a universal proxy card. According to this Olshan memo, this marks the first time that such a card was successfully used in a control proxy contest in the US. Here’s an excerpt:

The universal ballot adopted by both EQT and the Rice Team named both EQT’s and the Rice Team’s nominees on their respective proxy cards. The only difference related to the presentation of the two cards, in which each side highlighted how it desired shareholders to vote. Copies of the two cards can be found here (Rice Team) and here (EQT).

As shown, the Rice Team made clear on its proxy card a recommendation for all seven of its nominees and for five of the Company’s nominees that it did not oppose, to permit shareholders to vote for all 12 available spots. Similarly, the Company recommended a vote for all 12 of its nominees and against the Rice Team’s nominees, other than existing director, Daniel Rice IV, who was nominated by both EQT and the Rice Team.

The Rice Team obtained public support from many of EQT’s largest shareholders, including T. Rowe Price Group Inc., D.E. Shaw & Co., Kensico Capital Management Corp. and Elliott Management Corp., along with proxy advisory firms Institutional Shareholder Services (“ISS”) and Egan-Jones Ratings.

The use of a universal ballot for a majority slate of directors is unprecedented and, in our view, may become more common in future proxy contests given the Rice Team’s success here. In fact, ISS noted the following in its report recommending that shareholders vote for all of the Rice Team’s nominees on that team’s universal proxy card:

“The adoption of a universal card was an inherently positive development for EQT shareholders (as it would be in any proxy contest), in that it will allow shareholders to optimize board composition by selecting candidates from both the management and dissident slates.”

Despite pushing for the adoption of universal proxies, some activists had recently cooled on their potential use. For instance, as we blogged last fall, Starboard Value’s CEO Jeff Smith expressed concern that in its current form, the universal ballot might tip the playing field in management’s favor. It will be interesting to see if the outcome of yesterday’s EQT vote causes people to recalibrate that assessment.

John Jenkins