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Now that the SEC’s universal proxy rules are effective, everyone is anxious to see what impact they’ll have – and what issues the new process will create for companies facing a proxy contest. John shared a roundup of recent commentary yesterday on DealLawyers.com. One thing that a number of experts are pointing out is that battles will get more personal now that all of the candidates are on one card. Here’s a prediction from Okapi Partners’ Bruce Goldfarb in a recent Forbes article:

It is a near-certainty that future proxy campaigns are going to focus more on the personal attributes of the individual candidates. Each side will need to make a strong case for the qualifications of each person nominated for a board seat. This process may lead to each side publicly “dissing” the capabilities, experience, and perhaps even the integrity of the other side’s nominees.

This means you’ll want to carefully consider your director bios, skills, and all of the surrounding disclosures going in to 2023 – presenting your directors as personable & savvy candidates who bring important benefits to the company. What’s also important to remember is that this change isn’t happening in a vacuum – it is coming at a time when director skill-sets and oversight structures are already under the microscope. Aon’s Karla Bos sent me this pondering based on a post from Michael Levin at The Activist Investor:

Obviously just getting a director onto the ballot doesn’t mean it’s easy to get them elected, but it certainly could garner additional attention. I wonder if, as navigating the UPC process becomes clearer, there might be an increase in nominations of qualified “ESG directors” in lieu of submitting ESG shareholder proposals? Or will that possibility simply accelerate the trend of companies pursuing constructive shareholder engagement with “little-a” activists?

This may not be something we see right out of the gate, but it’s not outside of the realm of possibility. It was only a year ago that ExxonMobil lost board seats in a campaign that put “ESG” concerns in the spotlight. CalSTRS warned at the time that it was just the beginning of an “activist stewardship” trend – where “universal owners” will be prepared to replace directors if they feel that engagements are ineffective. I also blogged at that time about a playbook for responding to (or heading off) ESG-themed activist inquiries. More recently, Emily noted on our “Proxy Season Blog” that when looking at responsiveness to ESG proposals, large asset managers are also developing escalation pathways for director votes.

For practical insights on how to work with your shareholders and protect your board from activists, join us in October for “Next-Gen Activism: Are You Prepared?” – with Davis Polk’s Ning Chiu, Okapi Partners’ Bruce Goldfarb, SGP’s Rob Main, and Wachtell Lipton’s Sabastian Niles. This critical session is part of our “Proxy Disclosure & 19th Annual Executive Compensation Conferences” – happening virtually October 12th – 14th. Here’s the full agenda – 18 sessions over 3 days, including a dialogue with Corp Fin’s Renee Jones and essential guidance from lots of other heavy-hitters. Sign up online, email sales@ccrcorp.com, or call 1-800-737-1271.

In addition, check out the agenda for our “1st Annual Practical ESG Conference” – which is happening virtually on Tuesday, October 11th. This event will help you avoid ESG landmines and anticipate opportunities. You can bundle the Conferences together for a discount.

– Liz Dunshee