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Federal Register / Vol. 86, No. 228 / Wednesday, December 1, 2021 / Rules and Regulations
potential change in the number of mixed-board outcomes at contests as a result of the final amendments. We are also unable to quantify the change in the instance of proxy contests that may result from the final amendments.
Although many commenters supported the mandated use of universal proxy in contested director elections, some commenters raised a number of economic concerns with the proposed amendments and also suggested alternatives in some cases. We have considered those concerns and, where appropriate, have expanded our economic analysis to address those concerns and alternatives.
B. Baseline To assess the economic impact of the final amendments, we are using as our baseline the current state of the proxy process. Our baseline includes existing Commission rules, state laws, and corporate governing documents that jointly govern the ability to solicit proxies in support of director nominees other than the registrant nominees and the manner in which contested elections are conducted. This section discusses the parties involved in director election contests under the current legal framework, current proxy voting practices, and the means available to shareholders to influence the composition of boards of directors.
1. Affected Parties We consider the impact of the final amendments on shareholders, registrants, dissidents in contested elections who are typically also shareholders, and directors.

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a. Shareholders Different types of shareholders exhibit different degrees of involvement in voting on matters up for a vote at the companies they invest in. In particular, a study by a proxy services provider found that there are, on average, large differences in involvement by institutional investors compared to retail investors.185 Institutional and retail investors also face different levels of difficulty and resource constraints to vote for their preferred choices of nominees in contested director elections under current rules.186 As a result, the final amendments are likely to have a differential impact with respect to the costs of voting and feasible voting 185 See Broadridge and PwC, Proxy Pulse 2020
Proxy Season Review 2020, available at https
www.broadridge.com/_assets/pdf/broadridgeproxypulse-2020-review.pdf Proxy Pulse 2020.
186 See infra Section IV.B.2.d for a discussion on different shareholders current ability to arrange split-ticket voting.

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choices for these two types of shareholders.
The number of beneficial shareholder accounts for U.S. public companies varies significantly by company market capitalization: The average median number of beneficial shareholder accounts is approximately 3,900 1,400
for companies with less than $300
million in market capitalization, approximately 11,000 5,700 for companies with between $300 million and $2 billion in market capitalization, approximately 28,300 16,500 for companies with between $2 billion and $10 billion in market capitalization, and approximately 279,000 102,700 for companies with market capitalization above $10 billion.187 Among all companies, we estimate that 91% of account holders are retail investors.188
For U.S. public companies that held their annual meetings in the main 2020
proxy season i.e., between January 2020
and June 2020, a study by a proxy services provider found that retail investors held approximately 29% of shares held in brokerage accounts and institutional investors held 71%.189 An earlier study by the same proxy services provider for U.S. public companies that held their annual meetings in the main 2016 proxy season i.e., between January 2016 and June 2016, found that the percentage of ownership by retail investors varies significantly with company size, and was estimated to be 67% in companies with less than $300
million in market capitalization, 32% in companies with between $300 million and $2 billion in market capitalization, 23% in companies with between $2
billion and $10 billion in market capitalization, and 27% in companies with market capitalization above $10
billion.190
Retail and institutional shareholders exhibit very different voting behavior. In the main 2020 proxy season, while institutional investors voted 92% of their shares, retail investors voted only 187 Based on industry data provided by a proxy services provider. Note that an individual shareholder may have more than one account, so the number of beneficial shareholders likely is lower than the number of beneficial shareholder accounts. For the purpose of estimating costs related to distribution of proxy materials, the number of accounts is the more relevant number because dissemination costs such as intermediary and processing fees apply on a per account basis per NYSE Rule 451. The data is based on domestic companies that held shareholder meetings between July 1, 2018 and June 30, 2019.
188 Id.
189 See Proxy Pulse 2020.
190 See Broadridge and PwC, Proxy Pulse 2016
Proxy Season Review 3d ed. 2016, available at https www.broadridge.com/proxypulse/_assets/
docs/broadridge-proxypulse-3rd-edition-2016.pdf Proxy Pulse 2016.

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28% of their shares.191 Based on an earlier study of the main 2015 proxy season, the voting propensity of retail investors does not vary significantly by the size of the registrant.192 By contrast, institutional investors vote a significantly smaller portion of their shares in registrants with less than $300
million in market capitalization 72%
than in larger registrants 91% to 93%,193 which may be a function of the types of institutions that invest in companies of different sizes.
Retail and institutional investors may also have differential access to resources that can be expended in order to cast a vote, and may have different levels of incentive to expend such resources. In general, we expect retail investors to face greater resource constraints than institutional investors. Differences across shareholders in the ability to take advantage of different approaches to voting and in the resources expended on voting are discussed in more detail in Sections IV.B.2.d and IV.C.1 below.
b. Registrants The final amendments mandating the use of universal proxy cards in director election contests will apply to all registrants that have a class of equity securities registered under Section 12 of the Exchange Act and are thereby subject to the Federal proxy rules, except funds. The amendments will not apply to foreign private issuers or companies with reporting obligations under only Section 15d of the Exchange Act, whose securities are not subject to the Federal proxy rules. As of December 31, 2020, we estimate that approximately 5,400 registrants had a class of securities registered under Section 12 of the Exchange Act and will be subject to the amendments mandating the use of a universal proxy card in contested director elections.194
191 See Proxy Pulse 2020. We acknowledge that the voting participation of retail shareholders in particular could increase in the case of a contested election, because of greater media coverage and expanded outreach efforts, but we do not currently have data that would allow us to separately estimate the degree of retail participation in contested elections.
192 See Broadridge and PwC, Proxy Pulse 2015
Proxy Season Wrap-up 3d ed. 2015, available at http media.broadridge.com/documents/
ProxyPulse-Third-Edition-2015.pdf.
193 Id.
194 We are able to estimate the number of registrants with the class of securities registered under Section 12 of the Exchange Act by reviewing all Forms 10K and 10K amendments filed during calendar year 2020 with the Commission. After reviewing all forms, we then count the number of unique registrants that identify themselves as having a class of securities registered under Section 12b or Section 12g of the Exchange Act. Foreign private registrants that filed both Forms 20F and 40F, as well as asset-backed registrants that filed
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