Ackman’s Push on Activist Board Candidates Progresses at SECBy and
Agency proposal would make it easier to get dissidents elected
SEC votes to seek public comment on ‘universal’ proxy ballots
The U.S. Securities and Exchange Commission proposed rules Wednesday that would give shareholders who don’t physically attend companies’ annual meetings more freedom to vote for directors nominated by investors. The SEC plan, backed in a 2-to-1 vote of the agency’s commissioners, would require companies with contested board elections to broadly issue what are known as universal ballots that include the names of candidates backed by corporations and those supported by activists.
The proposal is a win for hedge funds like Ackman’s Pershing Square Capital Management, which has long argued for such a change. Still, Wednesday’s vote is a first step that enables the agency to seek public comment on its plan. To be enacted, the rules require a second vote by the regulator’s commissioners.
“Theses changes would allow shareholders to choose individual director
nominees whom they believe represent the best mix of skills and qualifications
to run their company without being needlessly confined to an all-or-nothing
vote on slates of nominees chosen by management or the dissident,” SEC Chair Mary Jo White said at a meeting in Washington.
While Ackman has cast the issue as one of shareholder democracy, it’s also proved critical in activist campaigns. Back in 2009, one candidate he backed for director in his ultimately unsuccessful campaign at Target Corp. urged the use of universal ballots, drawing a rebuke from the Minneapolis-based retailer. Meanwhile, in 2012, Canadian proxy voting rules helped Ackman get his way in a campaign targeting Canadian Pacific Railway Ltd.
Pershing Square declined to comment on the SEC’s plans.
Republican Michael Piwowar, the SEC commissioner who opposed proposing the changes, said that the rule would make proxy fights at public companies more likely and that it would cause retail investors to lose out as dissidents more actively court institutional shareholders. In a statement after the rule was proposed, the U.S. Chamber of Commerce cautioned that the rule would turn director elections into “political-style campaigns.”
“Universal proxy cards could be seen as activist-friendly, but are likely to be viewed as promoting ‘shareholder democracy’ because shareholders could split their tickets by directly voting for the candidates of their choice on the universal card,” Richard Grossman, a partner at law firm Skadden Arps Slate Meagher & Flom LLP, said ahead of the vote.