Another Case of Elections Making a Difference

As a result of regulatory changes under the Biden administration, publicly held companies will be required to distribute proxies to their shareholders with all candidates for the board of directors.

Before this, alternative slates for the board of directors had to be sent out separately, at not inconsiderable cost, and it made it impossible for people to cast votes for nominees from both slates.

This should have the effect of making the positions of board members far less secure, and, one would hope, more responsive and responsible:

Sinking stock prices and a change in proxy-voting rules are emboldening many first-time shareholder activists to seek changes at some of the biggest names in American corporations.

Companies, always wary of activist advances, are feeling particularly vulnerable as a result of new rules imposed by U.S. regulators in September requiring the use of a so-called universal proxy card in corporate-director elections, bankers and lawyers say.

In the new format, directors nominated by a company must be listed on the same ballot as those put forth by activists, enabling investors to pick and choose, rather than voting entirely with either the company or the activist.

Advisers to companies say the likelihood of at least gaining one board seat will increase significantly for smaller players. That’s especially true given that they will no longer incur the substantial expense—sometimes running into six figures or more—of printing and mailing proxy cards to all shareholders, lowering the barriers to entering the activist game.

………

“This proxy season is shaping up to be the busiest on record,” said Shaun Mathew, a partner at law firm Kirkland & Ellis LLP who advises companies on how to prepare for and respond to activists.


“Companies are concerned it will draw in first-time activists who think they can take advantage of the new system to threaten proxy contests to create leverage to advance their agendas,” he said.

There is a better word to describe these, "Activists," owners.

We have been told for decades that shareholders are owners of these companies, and that through shared ownership of publicly traded companies, we all gain a stake in the prosperity of these companies.

The reality is that the upper management, including the (typically grossly overpaid) board of directors run a dictatorship in which they direct the proceeds of their businesses to themselves, and not to the owners.

Of course, this will also further empower corporate raider rat-f%$# types like Carl Icahn, but nowhere near as much.  They already exert excessive influence over companies, frequently pushing short term thinking to the detriment of those enterprises.

This is a very good thing.