DealLawyers.com Blog

With the first anniversary of the effective date of the universal proxy rules fast approaching, commentators are starting to provide some thoughts on the extent to which the rules have – or haven’t – changed the activism landscape.  This introduction to a recent Sidley article in Directors & Boards provides an overview of the changes resulting from the universal proxy rules:

The universal proxy rules, which went into effect on September 1, 2022, have shifted the landscape of shareholder activism by allowing shareholders to “mix and match” their votes across proxy cards in contested elections. Since September, the move to candidate-based (rather than slate-based) voting has encouraged activists to nominate smaller, more targeted slates, and the added leverage in settlement negotiations has ultimately resulted in activists winning a larger number of board seats.

In addition, mega-cap companies in the United States have been targeted more than ever before, despite a modest decline in total campaigns, with some companies becoming targets of the growing “swarming” phenomenon, whereby multiple activists target a vulnerable company concurrently or in rapid succession.

The article says that in this heightened threat environment, boards can benefit from an effort to “think like an activist” by thinking critically and objectively about their vulnerabilities and taking steps to address them. As I’ve previously blogged, that’s a strategy that seems to have paid dividends for companies.

By the way, Michael Levin at The Activist Investor is putting together a webcast called “Universal Proxy Card After One Year.” The program features Prof. Slava Fos of Boston College and Abbott Cooper, Managing Member of Driver Management Company LLC.  It will be held on Wednesday, July 26th from 10:00 am to 11:15 am eastern. The webcast is free and you can register for it here. I attended Michael’s program on UPC last year and found it very informative. I plan on attending this one as well.

– John Jenkins