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Federal Register / Vol. 86, No. 228 / Wednesday, December 1, 2021 / Rules and Regulations
lotter on DSK11XQN23PROD with RULES2

representation in a bit more than half of the director election contests 53 out of 101, and achieved majority control in approximately 20% of contests.
Contests differ in the closeness of voting outcomes. The staff has analyzed the difference in votes between the elected director with the lowest number of votes and the nominee who came closest to being elected. Out of the 47
contests initiated in 20172020 that proceeded to a vote, registrants disclosed full voting results in Form 8
K filings in 41 contests. In these contests, the median director elected with the fewest votes received 73%
more votes than the nominee with the next highest number of votes. The median difference in votes received between the director elected with the fewest votes and the nominee with the next highest number of votes as a percentage of total outstanding votes was approximately 19%, and around 24% of the contests 10 out of 41 had a difference in votes received as a percentage of outstanding votes of 5%
or less. In the contests where the difference in votes received was 5% or less of total outstanding votes, the elected director who received the fewest votes received no more than 13% more votes than the non-elected nominee who received the greatest votes. For the purpose of our analysis below, we define close contests as those where the difference in votes received between the director elected with the fewest votes and the nominee with the next highest number of votes is 5% or less of total outstanding votes, because in such contests a relatively small number of shareholders could have been determinative of the outcome.
We are unaware of any nominal contest that has resulted in the dissident gaining seats for their nominees.
Dissidents may nevertheless choose to initiate nominal contests to pursue goals other than changes in board composition, such as to publicize a particular issue or to encourage management to engage with the dissident. However, we do not have data that would allow us to measure success along those other dimensions.
d. Split-Ticket Voting Shareholders have the option of voting a split ticket but can do so only by attending the shareholder meeting in person and voting their shares at that meeting. In practice, however, in-person meeting attendance may be limited due to cost and other logistical constraints,233 which may be especially 233 See, e.g., letter from the Council of Institutional Investors dated Jan. 8, 2014, available
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likely for small shareholders and retail investors. We understand that in certain elections, the parties to the contest and their agents e.g., proxy solicitors will help some shareholders split their ticket by arranging for an in-person representative to vote these shareholders shares at the meeting on the ballots used for in-person voting. We do not have data on the number or characteristics of shareholders that are arranging to vote a split ticket through current practices, but our understanding is that these practices are available only to relatively large shareholders.
We recognize that the monetary costs and other burdens of attending a meeting in person will likely be lower to shareholders if the meeting is held virtually, because the time and expenses associated with travelling to the meeting would be eliminated. However, there may still be time or other resource constraints that would affect a shareholders ability to attend a virtual meeting. Before the COVID19
pandemic, fully virtual or hybrid annual meetings were a small fraction of annual meetings, but growing steadily. For example, one recent study of shareholder meetings by U.S. registrants found that virtual or hybrid shareholder meetings grew from 20 in 2011 to 285
in 2019, with about 60 to 70 new companies adopting meetings with a virtual component each year after 2015.234 The arrival of the COVID19
pandemic in the United States in March 2020 caused many registrants to switch to a virtual format for their shareholder meetings, and one study found that more than 2,300 annual meetings were held virtually in 2020. Based on 1,957
virtual meetings hosted by one proxy services provider in 2020, the average number of shareholders voting at virtual meetings rather than voting in advance by proxy, held in 2020 was 13
shareholders for meetings with shareholder proposals 218 cases and 2
shareholders for meetings without shareholder proposals.235 Thus, inat https www.sec.gov/rules/petitions/2014/petn4672.pdf describing in-person attendance as generally an expensive and impractical proposition. See also letter from CII dated Dec. 28, 2016; letter from Fidelity; letter dated Dec. 23, 2016
from Hermes Hermes; letter from Trian. The burden of attending a meeting for the purpose of voting a split ticket may be significantly lower in the case of a virtual shareholder meeting but such online meetings are still relatively rare.
234 See Francois Brochet, Roman Chychyla &
Fabrizio Ferri, Virtual Shareholder Meetings, European Corporate Governance InstituteFinance Working Paper No. 777/2021, at 10 July 1, 2021, available at https ssrn.com/abstract=3743064
retrieved from SSRN Elsevier database or http
dx.doi.org/10.2139/ssrn.3743064.
235 See Broadridge, Virtual Shareholder Meetings 2020 Facts and Figures April 2021, available at
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person voting appears to have been rare also in virtual meetings, suggesting shareholder still have a strong preference for voting by proxy, or face barriers to attending and voting at the meeting, even when meetings are held virtually. It is our understanding that virtual meetings are still in widespread use this year 2021 as we are still in the COVID19 pandemic. It remains to be seen to what extent registrants that were forced to switch to virtual meetings during the current pandemic will continue to hold virtual meetings going forward. Moreover, among the 101
proxy contests initiated from 2017
2020, staff analysis found that only 13
annual meetings were held virtually, and all of those were held after March 2020 making up approximately 59% of the meetings in the sample that were held after March 2020.
For shareholders that do not have ready access to other arrangements, the decision of whether or not to attend a meeting or seek other arrangements for splitting their ticket is likely to depend on having the ability and resources to do so, as well as having the incentive to incur the associated costs. To the extent an individual investor believes vote splitting is beneficial, the larger its ownership stake is, the greater the financial incentives to incur the current costs of arranging a split-ticket vote.
However, beyond the direct financial incentives from a larger ownership stake, a large investor also has a voting impact commensurate with that stake, which increases the likelihood that its votes are determinative. This in turn, increases the large investors incentives to arrange for vote splitting when deemed beneficial. We believe institutions are more likely than retail shareholders to have both the resources and the incentives to currently vote a split ticket if they have the preference to do so.
Because the incentive to arrange a split-ticket vote when such a vote is preferred is dependent on having both a sizable financial stake, in dollar terms, as well as significant voting influence, in percentage terms, we consider the distribution of both of these factors for institutional shareholders. We use data from Form 13F filings to estimate these distributions, which limits us to considering institutions required to report their holdings on Form 13F.236
https www.broadridge.com/_assets/pdf/vsm-factsand-figures-2020-brochure-april-2021.pdf.
236 Non-exempt institutional investment managers that exercise investment discretion over $100 million or more in Section 13f securities are required to report their holdings on Form 13F with the Commission.

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