Activist company

Activists seek to win more power in company elections

New election rules imposed by US regulators have many companies worried about activist shareholders becoming board members.

The Securities and Exchange Commission (SEC) recently finalized revisions to the rules for electing corporate directors by requiring companies to provide shareholders voting by proxy with a “universal ballot.”

Under the outgoing rules, shareholders voting by proxy (such as email or traditional mail) previously received two sets of ballots with rival sets of nominees from directors and activists. Shareholders must then choose one of the two sets. Only shareholders who attended the company’s annual meeting in person could vote for nominees from both sets.

But under the new rules, the universal ballot will list all the candidates in one place. Thus, shareholders voting by proxy can now choose from a list of common candidates rather than being obliged to choose one of two sets.

“Companies are concerned that he will attract first-time activists who think they can take advantage of the new system to threaten proxy contests to create leverage to advance their agendas,” Shaun Mathew, partner at the firm of lawyers Kirkland & Ellis LLP who advises companies. on how to prepare for and respond to activists, told the Wall Street Journal.

Universal ballots are a double-edged sword from a business perspective. Since it allows shareholders to choose nominees individually rather than as a group, dissenters could grab board seats. However, it also ensures that the company is less likely to lose the majority of seats.

The SEC had voted to approve the revisions 4-1, with the dissenting vote cast by Republican Commissioner Hester Peirce.

Activist Directors, ESG

Last year, an activist hedge fund won three seats on Exxon Mobil’s board despite owning only a tiny fraction of the company’s stock. Rookie activists have launched campaigns at several companies like News Corp. and Hasbro Inc.

Worried about activist interference, Strive Asset Management had sent a letter to the boards of Walt Disney and Apple in September, asking them not to let their focus on environmental, social and governance (ESG) concerns affect their decision-making processes.

The dissemination of ESG policies is viewed with skepticism by some Republicans. In a letter earlier this month, for example, Sen. Marsha Blackburn (R-Tenn.) and Sen. Tom Cotton (R-Ark.) warned 51 of the nation’s top law firms that the ESG movement attempts to “weaponize corporations” and reshape society in ways American citizens would never accept through ballots.

“The collusive effort to restrict the supply of coal, oil and gas is of particular concern, driving up energy costs around the world and empowering American adversaries abroad,” the letter said. .

Although activists are pushing the ESG agenda forward, most investors barely care. A Capitol.com poll released in September found that traders and investors are not prioritizing such investments, with 52% not even considering ESG factors when picking a stock.

Follow

Naveen Athrappully is a reporter and covers world affairs and events at The Epoch Times.