SEC Proposed Rule On Universal Proxies

It has long been the view that a shareholder's ability to elect directors is a fundamental right under corporate law. Few shareholders attend meetings in person, and therefore the instrument used to exercise that right has been the proxy. However, due to a combination of U.S. federal and state law requirements, the current U.S. proxy regime has been unable to replicate the options available to shareholders voting at a meeting. This has been particularly evident in the case of proxy contests, where shareholders are often left with the option of voting for either the company's director nominees or the dissident's director nominees, but not a combination.    

On October 26, 2016, by a 2-1 vote among Commissioners, the SEC proposed a rule to fundamentally change the nature of proxy contests. If approved, instead of voting for directors on one slate or the other, shareholders voting by proxy could choose a combination of management and dissident nominees.