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18 December 2017 • Articles

Agenda Week

Can renewed calls for universal proxies change voting?

Close and controversial high-profile proxy contests at Procter & Gamble and ADP have again raised questions about the proxy voting process in the U.S. Shareholders are continuing calls for the use of universal proxy ballots in contested director elections as regulators at the SEC mull the implementation of a universal proxy rule. Meanwhile, Congress sits on the Financial Choice Act — which would prohibit the SEC from ever implementing such a rule.

Governance experts encourage boards to talk to shareholders about improvements to the proxy voting process and prepare for the request of a universal proxy ballot in any future proxy contests at their company. Comment letters to the SEC continue to trickle in as companies and shareholders weigh the pros and cons of universal proxy ballots.

“The adoption of a universal proxy card, at the most basic level, will provide a solution to what is often regarded as a cumbersome voting process when trying to split your vote between issuer and activist,” writes Michael Verrechia, managing director of activism and contested situations at Morrow Sodali, in an e-mail.

Shareholders continue pressing for a universal proxy because it would place more emphasis on the quality of directors as opposed to who is nominating them, create equal opportunities for all nominees and give shareholders who cannot attend the annual meeting in person the same rights as those who can.

“Without a universal proxy in place, holders are left to make voting decisions between two competing proxy cards,” Verrechia says. “The holder’s shares are then counted on whichever card is voted, and in some cases there can be unintended consequences of voting one card versus the other.”

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