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New SEC Rules Likely To Bolster Activists

It looks like SEC head Mary Jo White thinks that shareholder activism is a good thing, at least based on her comments in Chicago on Thursday, when she said the SEC is working on rules to implement a “universal ballot” that would make it easier for shareholders to vote on board candidates offered by activist investors.

White was speaking to the Society of Corporate Secretaries and Governance Professionals.

A universal ballot is a single voting form for use in corporate elections. Shareholder voters in contested corporate elections currently have to vote on two sets of ballots, each one offering a rival slate of candidates for the BoD.

New SEC Rules Likely To Bolster Activists

More on new SEC rules

The new rules being developed by the SEC will apparently mandate that a public company use a universal ballot in contested corporate elections.

According to corporate governance experts, the proposed rules are likely a boon to activist campaigns, as the universal ballot generally gives outsiders trying to get a seat on a board an edge, particularly in getting the votes of small, “retail” investors. However, a number of analysts have pointed out that a universal ballot is really a relatively minor tweak to the process, and probably won’t make much of a difference to activist campaigns in most cases.

Supporters of universal ballots argue they permit shareholders more choices by affording the opportunity to split their votes, to vote for two candidates from an activist instead of all three, for example.

Most major public firms do not support the idea, and argue that universal ballots could confuse investors and introduce unnecessary uncertainty into the voting. They also argue that universal ballots will make voting more complicated and lead to new problems. For example, ballots where shareholders voted for more candidates than open board seats would have to thrown out and not counted.

Shareholders also frequently just sign a proxy form and mail it back in without marking votes. Currently, that is counted as as voting for the incumbent management slate, but that couldn’t be assumed for a ballot with candidates representing competing interests.

In her comments Thursday, White noted: “While I agree that the devil will be in the details, I have asked the staff to bring appropriate rule-making recommendations before the commission.”