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Federal Register / Vol. 86, No. 228 / Wednesday, December 1, 2021 / Rules and Regulations
A new instruction to the adopted rule clarifies that, where applicable state law gives legal effect to votes cast against a nominee, a soliciting party that wishes to present the for-all voting option described above on its universal proxy card must also provide shareholders an against-all option rather than a withhold-all option.145
H. Director Election Voting Standards Disclosure and Voting Options 1. Proposed Rules The Commission proposed additional amendments to the form of proxy and disclosure requirements with respect to voting options and voting standards that would apply to all director elections.146
First, the Proposed Rules would amend Rule 14a4b to: 1 Mandate the inclusion of an against voting option in lieu of a withhold authority to vote option on the form of proxy for the election of directors where there is a legal effect to such a vote; and 2
provide shareholders who neither support nor oppose a director nominee an opportunity to abstain rather than withhold authority to vote in a director election governed by a majority voting standard.147 Second, the proposed rule would amend Item 21b of Schedule 14A to expressly require the disclosure of the effect of a withhold vote. Finally, the Proposed Rules would delete the phrase the method by which votes will be counted from Item 21b of Schedule 14A.

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2. Comments Received Several commenters supported the proposed requirement that the form of proxy for a director election governed by a majority voting standard include a means for shareholders to vote against each nominee and a means for shareholders to abstain from voting in lieu of providing a means to withhold authority to vote. 148 Many of these commenters requested that the Commission further amend the proxy rules to prohibit registrants from providing an against voting option if making that choice has no legal impact on the outcome of the election and to require registrants to refer to voting options consistently throughout the 145 See Instruction 2 to paragraph f of Rule 14a 19. See also Section II.H below and similar changes to the text of Rule 14a4.
146 The proposed amendments to the form of proxy and disclosure requirements with respect to voting options discussed in this section would apply to funds.
147 See proposed Rule 14a4b4.
148 See letters from CII; Colorado PERA; CalSTRS;
SIFMA; SBAFL; NY Comptroller; AFSCME;
Carpenters; letter dated Jun. 7, 2021 from California Public Employees Retirement System CalPERS.

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proxy materials.149 One commenter suggested that Instruction 2 to Rule 14a 4b2 be eliminated entirely, and that same commenter recommended that the Commission replace the withhold voting option with an abstain option for director elections governed by a plurality voting standard.150
Several commenters addressed the proposed changes to Item 21 of Schedule 14A. These commenters supported the proposed amendment to Item 21b of Schedule 14A to require the disclosure of the effect of a withhold vote.151 Another commenter believed that the phrase the method by which votes will be counted in Item 21
of Schedule 14A should be retained, in order to clarify for shareholders the effect of each voting option presented on the proxy card, as well as how each voting option will be counted.152
3. Final Amendments We are adopting the rule amendments with the modifications described below.
Rule 14a4b mandates, as proposed, the inclusion of an against voting option in lieu of a withhold authority to vote option on the form of proxy for the election of directors where there is a legal effect to such a vote. It also provides shareholders who neither support nor oppose a director nominee an opportunity to abstain rather than withhold authority to vote in a director election governed by a majority voting standard. These changes will provide shareholders with a better understanding of the effect of their votes on the outcome of the election. We also have not eliminated Instruction 2 to Rule 14a4b4, as one commenter had requested, because it may provide useful guidance about voting options where applicable state law gives legal effect to votes cast against a nominee.
We agree with commenters, however, that including an against voting option on a proxy card where there is no legal effect to such vote is unnecessarily confusing for shareholders and have therefore amended Rule 14a4b to prohibit such a voting option on the proxy card where such votes have no legal effect. Further, in light of comment received from the public, we are retaining the phrase the method by which votes will be counted from Item 21b of Schedule 14A to avoid any ambiguity regarding the need for clear disclosures in the proxy statement regarding the effect of 149 See letters from CII; CalSTRS; SBAFL; NY
Comptroller; Colorado PERA; AFSCME.
150 See letter from Carpenters.
151 See letters from CalPERS; CII.
152 See letter from Carpenters.

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each voting option presented to shareholders.
I. Bona Fide Nominee and Short Slate Rules 1. Elimination of the Short Slate Rule a. Proposed Rules The Commission proposed to amend Rule 14a4d to eliminate the short slate rule for registrants other than funds. The short slate rule allows dissidents soliciting in support of a partial slate of nominees that would make up a minority of the board of directors to seek authority to vote for some of a registrants nominees.153 The Proposed Rules would eliminate the short slate rule for operating companies because it would be unnecessary with a universal proxy requirement and the revised bona fide nominee rule. The Proposed Rules, however, would maintain the short slate rule for funds, since, as proposed, they would not be included in the universal proxy requirement.154
b. Comments Received Relatively few commenters addressed the proposed elimination of the short slate rule for operating companies that would be subject to a mandated universal proxy requirement. Several commenters supported its elimination in connection with the adoption of a universal proxy requirement, noting that such a system would eliminate many of the practical constraints associated with the short slate rule as well as the bona fide nominee rule.155 Another commenter similarly supported the changes, but also advocated retaining the short slate rule, in optional form, if the universal proxy requirement is not mandated.156
c. Final Amendments We are eliminating the short slate rule, as proposed, for operating companies that will be subject to the final rules mandating the use of universal proxy cards. The revisions we adopt to the bona fide nominee rule,157
along with the changes to mandate the use of a universal proxy card in all nonexempt director election contests, obviate the need for the short slate rule 153 See Rule 14a4d4. Rule 14a4d4ii provides that a dissident using the short slate rule may not name the registrant nominees for which it will vote using proxy authority; rather, the dissident may name only those registrant nominees for which it is not seeking proxy authority. This requirement may render the proxy card confusing for shareholders.
154 See infra Section II.J.
155 See letters from Elliott; CFA Institute.
156 See letter from Colorado PERA.
157 See infra Section II.I.2.

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