Understanding Universal Proxy Rules And Navigating Increased Shareholder Activism

As we enter the second proxy season under the Universal Proxy Rules, it has become ever more important for companies to understand the Universal Proxy Rules and be prepared to navigate the complexities of potential shareholder activism.

Overview of Universal Proxy Rules

The introduction and adoption of Universal Proxy Rules (Rule 14a-19 of the Securities Exchange Act of 1934) initiated a significant shift in the landscape of corporate governance. These rules, which became effective in 2022, require companies in a contested election to provide shareholders with a universal proxy card containing management and dissident nominees. This regulation is aimed at streamlining the proxy voting process and allowing shareholders to mix and match the nominees proposed by each of management and the activist when voting.