Washington, D.C. – Stephen Hall, Legal Director and Securities Specialist for Better Markets, issued the following statement on the filing of a comment letter to the SEC on the need to quickly adopt the “universal proxy” so that all shareholders are able to fully exercise their voting rights:
Today Better Markets filed a comment letter urging the SEC to quickly adopt the ‘universal proxy,’ a critical reform for shareholders. Shareholders are the owners of the companies in which they invest, and a critical aspect of that ownership is the ability to decide who will sit on the board of directors. However, the vast majority of shareholders can’t attend shareholder meetings in person. They have to vote by proxy, but because of outmoded rules, they face stringent limits on their ability to vote for the board members of their choice.
This irrational and unfair system undermines one of the most important mechanisms available to investors for holding management accountable and charting the right course for the company. As we point out in our comment letter, the universal proxy is even more important now than when it was first proposed in 2016. More and more companies are facing urgent and critical decisions about how to address climate change, racial justice, and other environmental, social, and governance (ESG) issues. In the meantime, many incumbent boards have been slow or unwilling to recognize these pressing challenges and to adapt to them. At this crucial time, shareholders simply should not be in a position where their voice on the direction of the companies they own is not fully heard, and the SEC must take action to create full and fair shareholder voting rights.
Unlike the few shareholders who can attend meetings in person, those relying on the proxy process only have the ability to cast a ballot either for management’s proposed slate of directors or the dissenters’ proposed slate of directors. They simply cannot pick and choose the combination of board members who they believe will lead the company in the right direction.
In November 2016, the SEC proposed a common-sense solution to this problem that would require all sides in a contested board election to provide shareholders with a ‘universal proxy’ card that includes all of the nominees, enabling shareholders to vote for their preferred mix of candidates.
Unfortunately, under prior SEC leadership, and in the face of some opposition by those representing incumbent managers, this proposal has languished for years. Thankfully, the SEC’S new leadership has revived it by reopening the comment period. We hope and expect that the agency will move forward without delay to issue a final universal proxy rule.
Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies – including many in finance – to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.com.