Tag: contested elections

SEC Adopts Mandatory Universal Proxy in Contested Elections

In early January 2015, hedge fund activist Trian launched a closely followed proxy fight against DuPont, claiming that the company had underperformed and that it should, among other things, be broken up into three parts. DuPont responded that, through implementation of its own strategic plan, it had delivered total shareholder return and cumulative capital return in excess of its proxy peers and the S&P 500.  Rejecting DuPont’s offer of a single board seat, Trian nominated a short slate of four directors and commenced an election contest.  Fast forward to February, when Trian submitted to the DuPont board a request that DuPont allow the use of a “universal proxy,” thus allowing shareholders to vote for their preferred combination of DuPont and Trian nominees using a single proxy card. Trian argued that it would provide shareholders with “maximum freedom of choice” and represent “best-in-class corporate governance.”  After consulting “with a range of proxy and governance experts” and evaluating the DuPont shareholder base, DuPont rejected that request, contending that there was “insufficient infrastructure” to support the use of a universal proxy card and that the process could “undermine voting access” for DuPont’s huge contingent of retail shareholders. In particular, DuPont was concerned that “the use of a universal proxy card would limit voting options for our ‘Street-name’ holders, as well as deprive holders of the ability to simply sign and return voting forms without marking a preference.”  At the annual meeting, Trian lost its bid, and DuPont’s full slate of nominees was elected. But the DuPont story ultimately ended favorably for Trian, notwithstanding its loss in the proxy contest.  After the election contest, Trian reignited its battle to break up the company and, after the company failed to hit targeted earnings, the CEO resigned. DuPont ultimately entered into an agreement to be acquired. A new rulemaking from the SEC to mandate the use of universal proxy, adopted last week by a vote of four to one, would likely have affected the course of that campaign and perhaps its outcome. Will we see more contested elections in the future?