March 17, 2023

UPC CDIs: Do they Make Space for a Current Activist Strategy?

Activist investors are leveraging one of the CDIs on universal proxy to delay designating the candidates who will actually stand in a contested election. Here’s my post on the Proxy Season blog on last week:

As Michael Levin at The Activist Investor (TAI) reports, in multiple instances this year, activist investors have identified more people than there are available board seats—initially designating a larger slate and then picking which of the designees will actually stand as nominees at a later date—presumably because more information is available later in the process. TAI cites three situations in 2023 where the activist designees exceeded the number of nominees for whom the activist intended to solicit proxies:

– Disney, where Trian nominated Nelson Peltz with his son as an alternate

– Rogers Corporation, where Starboard listed six candidates for four nominations

– Envestnet, Inc., where Impactive Capital lists four candidates for three seats

You can see how delaying the identification of the actual nominees might be beneficial to the activist, but I originally read the cited CDI 139.01 together with CDI 139.03 as not permitting this—other than Trian at Disney since the CDI clearly allows the identification of an alternate. However, the TAI blog explains that these activists have capitalized on the interplay between advance notice bylaws and the 60-day notice period in the UPC rules, as follows:

They know they must set forth the specific nominees in the 60-day notice, or alternatively in the definitive proxy statement. Nothing in SEC rules, state statute, or company bylaws requires the activist to decide on these specific nominees before then.

They complied with advance notice terms in company bylaws by listing all the possible nominees in the notice to the company. Later, they decide which candidates will stand for election, either when the activist files a definitive proxy statement with the SEC, or when it notifies the company of the nominees pursuant to the UPC rule.

Also, for those who don’t follow Blog, check out Liz’s post on a voting instruction form development based on a position Trian took in its aborted Disney proxy contest.

Meredith Ervine