Were Reports Of The Demise Of Universal Proxy Premature?

The specter of the possible imposition of mandatory universal proxy has long been with us. The SEC apparently considered requiring universal proxies back in 1992 and, in 2014, the Council of Institutional Investors filed a rulemaking petition asking the SEC to reform the proxy rules to facilitate the use of universal proxies in proxy contests. Then, in 2016, the SEC proposed amendments to the proxy rules that would have mandated the use of universal proxy cards in contested elections. And there it sat. With the change of administrations in the White House, followed by the change of administrations at the SEC, the proposal for universal proxy fell off the SEC's near-term agenda and was relegated to the long-term agenda. Moreover, disfavored by House Republicans, universal proxy would have been prohibited by various bills, including the Financial Choice Act of 2017 (which passed the House but not the Senate). (See this PubCo post.) Then, in July of this year, "several people familiar with the matter" advised Reuters that SEC Chair Jay Clayton "has in fact shelved the proposal." (See this PubCo post.) The specter of mandatory universal proxy had been transfigured into more of a spectral presence.

SideBar

A universal proxy is a proxy card that, when used in a contested election, includes a complete list of board candidates, thus allowing shareholders to vote for their preferred combination of dissident and management nominees using a single proxy card. In the absence of universal proxy, in contested director elections, shareholders can choose from both slates of nominees only if they attend the meeting in person. Otherwise, they are required to choose an entire slate from one side or the other. Because a later-dated proxy revokes an earlier-dated one under state law, it's not easy to split votes between slates. One impediment to the use of a universal proxy is the "bona fide nominee" requirement of Rule 14a-4(d)(1), which requires that a nominee consent to be named in the proxy and, if elected, to serve as a director.

But perhaps that conclusion was just a bit premature? In July, Clayton announced that the SEC would be holding a roundtable (now scheduled for November 15) to discuss the proxy process. His lengthy statement announcing the roundtable enumerated a variety of potential agenda topics, and buried under the broad-spectrum caption of "Other Commission Action" was the topic of universal proxy. (See this PubCo post.)

And then, at the recent meeting of the SEC's Investor Advisory Committee meeting, there seemed to be some consensus developing on the potential...