SEC Proposes Rules Requiring the Use of Universal Proxy Cards in Contested Director Elections

In late October, the U.S. Securities and Exchange Commission (SEC) proposed long-awaited changes to the proxy rules that would require parties in a contested election of directors to distribute universal proxy cards, i.e., a proxy card that includes director candidates nominated by a company’s management as well as those nominated by a shareholder. Under current rules, companies and dissidents use competing proxy cards. This prevents shareholders from voting by proxy for their chosen mix of director candidates by effectively requiring them to choose either management’s slate of nominees or the dissident’s mix of their nominees and their preferred management nominees. The SEC proposed the new rules in order to more closely align the process of voting by proxy with the way a shareholder would vote in person at a shareholder meeting.