On November 17, 2021 the SEC adopted proxy rule amendments that mandate the use of a “universal” proxy card in contested director elections. Activist shareholders will now have easier access to a company’s proxy card with minimum requirements. Under the adopted rules, shareholders will be able to vote by proxy for a mix of company and dissident nominees of their choosing (i.e., “splitting the ticket”). The final rule amendments regarding universal proxy will apply to all shareholder meetings involving contested director elections held after August 31, 2022, except those involving registered investment companies and business development companies.
These new rules are expected to substantially alter the game theory component of contested elections and shift the incentive structure for settlement sharply in the activists’ favor. Companies should begin to strategize now for how the new contested battlefield may look.