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Federal Register / Vol. 86, No. 228 / Wednesday, December 1, 2021 / Rules and Regulations
We are also amending the proxy rules for all director elections to:
Specify that the proxy card must include an against voting option when applicable state law gives effect to a vote against a nominee;
require proxy cards to give shareholders the ability to abstain in an election where a majority voting standard is in effect; and mandate disclosure about the effect of a withhold vote in an election.
We arrived at the estimates discussed below by reviewing our burden estimates for similar disclosure. The amendments regarding the use of a universal proxy card, required notices and related disclosure should result in only a small amount of additional required disclosure and the addition of only a limited amount of information the names of duly nominated director candidates for which the soliciting party has complied with Rule 14a19 on proxy cards. The application of these amendments will be limited to contested elections. In addition, the additional disclosure and changes to the proxy card relating to the appropriate use of against, abstain or withhold voting options should similarly result in only a small incremental increase in required disclosure; however, those changes will apply to proxy materials in all director elections, not just contested elections.
C. Aggregate Burden and Cost Estimates for the Amendments
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We derived our burden hour and cost estimates by estimating the total amount of time it will take to prepare and review the required disclosures called for by the final amendments. This estimate represents the average burden for all soliciting parties, both large and small. In deriving our estimates, we recognize that the burdens will likely successfully wage a proxy contest. Based on staff analysis of the industry data provided by a proxy services provider for 31 proxy contests between July 1, 2018 and June 30, 2019, less than 67% of the voting power was solicited by a dissident in not a single proxy contest in that sample. Of the 35 proxy contests between June 30, 2015 and April 15, 2016
analyzed in the Proposing Release see Section IV.B.2.b of the Proposing Release, only 2 dissidents solicited less than 67% of the voting power. In those instances, we estimate that the proposed amendments would have resulted in average incremental solicitation expenses exclusive of printing costs to the dissident of approximately $5,400 if the least expensive approach to soliciting through an intermediary had been used to solicit the required additional number of shareholders. See supra notes 262 and 263. For PRA purposes, we therefore estimate that there would be one contest annually that would not have otherwise solicited 67% and thus would incur additional solicitation costs of $5,400, which amount we add to the estimated reporting and cost burden associated with Regulation 14A.

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vary among soliciting parties. Some soliciting parties may experience costs in excess of this average in the first year of compliance with the amendments and some parties may experience less than the average costs.
As discussed more fully in Section IV.C.4 above, it is unclear whether the amendments will result in an increase or decrease in the number of election contests, and we therefore estimate no change in the number of proxy statement filings as a result of the amendments. We estimate that the average incremental burden for a registrant to prepare a universal proxy card in a contested election and include the required disclosure will be two hours. We similarly estimate that the average incremental burden for a dissident to prepare a universal proxy card in a contested election and include the required disclosure will be two hours. We additionally estimate that the average incremental burden for a dissident and registrant to prepare the notice to the opposing party containing the names of its nominees in a contested election will be approximately one hour. Thus, we estimate that the total incremental burden for Schedule 14A
will increase by three hours per election contest for registrants and three hours per election contest for other soliciting parties.418 For purposes of the PRA, we estimate there will be 25 annual election contests per year,419 resulting in 150
additional total incremental burden hours 6 hours 25 election contests under Schedule 14A as a result of adopted Rule 14a19 and the related amendments.
We estimate that the additional disclosure and changes to the proxy card relating to the appropriate use of against, abstain or withhold voting options in proxy materials for all director elections will be considerably less than one hour for each proxy statement and card relating to an election of directors. Unlike the other amendments relating specifically to election contests, these amendments will apply to all director elections, including director elections for funds.
As a result of these amendments, registrants may need to update certain standardized portions of their proxy 418 There may be a range of burdens by soliciting parties as they determine exactly how to present the proxy card and the language of the required disclosure; however, we estimate the burdens described above as the average burden for soliciting parties.
419 We do not estimate that there will be additional election contests as a result of the final rules. We estimate approximately 25 election contests per year based on the average of actual proxy contests for elections of directors in calendar years 20172020.

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statements and proxy cards, and many of those disclosures, once revised, are not likely to require significant revision from year to year. We estimate that these changes will result in an average of 10
minutes of additional burden per response.420 For purposes of the PRA, we estimate the changes will result in 1,062 hours of additional total incremental burden under Regulation 14A 10 minutes 6,369 filings and 222
hours of total incremental burden under Rule 20a1 10 minutes 1,333
filings.421
These estimates include the time and cost of preparing disclosure that has been appropriately reviewed, including, as applicable, by management, in-house counsel, outside counsel and members of the board of directors. This burden will be added to the current burden for Regulation 14A and Rule 20a1, as applicable. For proxy statements under Regulation 14A, we estimate that 75%
of the burden of preparation is carried internally and that 25% of the burden of preparation is carried by outside professionals retained at an average cost of $400 per hour. The portion of the burden carried by outside professionals is reflected as a cost, while the portion of the burden carried internally is reflected in hours. We estimate a similar allocation between internal burden hours and outside professional costs with respect to the PRA burden for Rule 20a1.
As a result of the estimates discussed above, we estimate for purposes of the PRA that the total incremental burden on all soliciting parties of the final amendments under Regulation 14A will be 909 hours for internal time 1,212
420 We estimate that the incremental burden for the additional disclosure and changes to the proxy card will increase by 20 minutes in the first year and then be reduced to five minutes in years two and three, resulting in a three-year average of an increased 10-minute burden per response.
421 For purposes of the Regulation 14A and Rule 20a1 collections of information, the number of filings corresponds to the estimated number of new filings that will be made each year under Regulation 14A and Rule 20a1, which include filings such as DEF 14A; DEFA14A; DEFM14A; and DEFC14A.
When calculating the PRA burden for any particular collection of information, the total number of annual burden hours estimated is divided by the total number of annual responses estimated, which provides the average estimated annual burden per response. The current inventory of approved collections of information is maintained by the Office of Information and Regulatory Affairs OIRA, a division of OMB. The total annual burden hours and number of responses associated with Regulation 14A and Rule 20a1, as updated from time to time, can be found at https
www.reginfo.gov/public/do/PRAMain. We recognize that the adopted rules may only effect a subset of the estimated proxy filings in the OMB inventory, but we are using the estimate for all proxy filings to provide a conservative estimate of the impact of the rule amendments.

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