The U.S. Securities and Exchange Commission (SEC) on Wednesday voted in favor of allowing investors who vote by proxy more freedom to choose their candidates during contested corporate board elections, as the agency's Democratic leadership seeks to bolster the voting rights of shareholders.
Until now, shareholders who voted remotely in contested elections had to choose from a full slate of board directors nominated by the management or a competing set of nominees provided by an activist investor.
Unlike in countries such as Canada and Australia, investors in the United States could not mix and match from these competing lists unless they send a representative to vote in person at the annual meeting. The vast majority of corporate votes are cast remotely.
The SEC rule requires "universal" proxy cards listing all duly nominated director candidates, effectively allowing shareholders to mix and match.
Investor advocates say the former system allowed corporate management to skew elections by proposing ballots with limited candidates whom they prefer. Other candidates submitted by investors are often relegated to separate ballots.
Business groups say the status quo was efficient and warned that a universal proxy card poses could lead to potential over-voting, more frequent disqualification of defective ballots, and even shareholder confusion.
In Person, Proxy Voting on Equal Footing
Wednesday's rule will put candidates voting in person and by proxy on equal footing, said SEC Chair Gary Gensler.
"It makes sense that shareholders should be able to see all the candidates in one place, just as they would in person. This is an important aspect of shareholder democracy," he added.
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