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Federal Register / Vol. 86, No. 228 / Wednesday, December 1, 2021 / Rules and Regulations
initiate such campaigns. As in the other contexts discussed above, it is difficult to predict to what extent proponents may increase the incidence of such campaigns, or to what degree the involved parties may react in other ways to the potential for somewhat higher support in solicitations without a competing slate. For example, any resulting increase in the frequency of such campaigns may be partially offset by accompanying changes in incentives for registrants to engage with proponents. Such interventions could also substitute, in some cases, for contested elections. It is unclear whether increased support for, or an increased incidence of, proponent initiatives would generally enhance or detract from the effectiveness of boards and the efficiency and competitiveness of registrants.
Some commenters were concerned about negative unintended consequences from permitting proponents conducting solicitations without a competing slate to include nominees in their proxy statements and proxy cards, and therefore opposed this approach.337 Two of these commenters in particular argued that the bona fide nominee rule revisions could lead to misleading or confusing proxy materials and adverse impacts on voting results in otherwise uncontested elections.338
We do not think there is a high risk of confusion among shareholders in the case where the soliciting proponent includes all nominees. Instead, in these cases the amendments we are adopting will serve to further shareholder enfranchisement by adding the director election to the menu of voting choices faced by shareholders voting on the proponents card. We acknowledge that there is some risk of confusion when the soliciting proponent includes some but not all nominees on its proxy card.
However, above we have clarified that when a dissident includes some but not all nominees on its proxy card, the dissident should disclose that shareholders who wish to vote for nominees not included on the dissidents proxy card may do so on the registrants proxy card in order to avoid potential liability under Rule 14a9 for omission of material facts.339 Such disclosures should help mitigate any confusion among shareholders in these cases.
An alternative to the final amendments would be to require proponents conducting solicitations without a competing slate to include the 337 See
letters from BR; Society; Sidley.
letters from BR; Society.
339 See supra Section II.I.2.c.
338 See
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names of all duly nominated director candidates on their proxy cards unless they are soliciting votes against all nominees. This approach may have limited effect in the case of a vote no campaign, because shareholders would already be able to vote for and against their choice of any registrant nominees by using the registrant proxy card. By contrast, in the case of a proponent that solicits in favor of a particular proposal, the registrant may choose to not include the proposal on its proxy card, in which case, shareholders voting on the proponents proxy card would be disenfranchised as to the selection of directors under current rules and similarly may be disenfranchised under the final approach unless the proponent chooses to include all director nominees on its proxy card. This alternative would remove the risk of such disenfranchisement with respect to voting for directors. However, the risk of such disenfranchisement under the final amendments is likely mitigated because we expect that such proponents would have the incentive to include the director nominees on their proxy card to increase the incentive for shareholders to use their card and would generally not have strategic reasons to exclude nominees from their proxy card because of the lack of a competing slate.
b. Use of Universal Proxies Mandatory Use of Universal Proxies in Non-Exempt Solicitations in Contested Elections Mandatory vs. Optional Use of Universal Proxies Requiring both the registrant and the dissident in any contested election with competing slates to use universal proxies will enable all shareholders to vote for the combination of candidates of their choice in all such elections, whether they vote by proxy or in person at the meeting. As discussed in more detail above, imposing this mandate on the registrant as well as the dissident may impose some direct costs on both parties and may result in potentially significant, but uncertain, strategic advantages or disadvantages for these parties, leading to further costs and benefits for these parties and either benefits or costs for shareholders at large. Mandating the use of universal proxies by registrants in particular may have certain significant implications.
Specifically, requiring registrants to use universal proxies will likely result in all shareholders receiving a proxy card that will allow them to vote for any combination of the full set of director nominees, more accurately reflecting the
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voting options available to shareholders at the meeting. However, requiring the names of the dissident nominees to appear on the registrants proxy card will allow a form of access to the registrants proxy materials without the eligibility criteria that accompany other forms of access,340 and could result in an increased incidence of nominal contests that capitalize on this new channel for such access. As discussed in Section IV.C.4.b above, it is unclear to what extent any dissidents would choose such an approach and whether any such contests would be beneficial or detrimental.
Some commenters were in favor of making the use of universal proxies optional for all parties rather than mandatory,341 which also has been recommended by certain observers in the past.342 Under an optional approach, whether or not a party chose to provide a universal proxy likely would depend on strategic considerations. Having the option rather than a requirement to use a universal proxy may benefit either registrants or dissidents, depending on the nature of individual contests.
Optional universal proxies likely would be used by a contesting party, to the possible detriment of its opponent, when the party believes that including the names of the opponents nominees on its own card would be in its best interest, but not otherwise. For example, a party that expects strong support for its opponents nominees may prefer to include those nominees on its proxy card to increase the likelihood that shareholders use its card, since they would be able to do so without giving up the ability to support at least some of the opponents nominees. Optional universal proxies may also mitigate the risk, relative to that under the final amendments, of electing a mixed board when such an outcome is inconsistent with the intentions of both the dissident and the registrant, because both parties may be less likely to use a universal proxy in such cases. This alternative may also reduce the likelihood of an increase in nominal contests because the registrant would control whether or not the names of dissident candidates were included on its proxy card.
Finally, because allowing the optional use of universal proxy cards would necessarily entail removing the impediments to such proxies in the existing proxy rules, such an approach might facilitate the private ordering of 340 For example, proxy access bylaws, where available, generally apply certain eligibility criteria including an ownership threshold.
341 See, e.g., letters from Davis Polk; Society.
342 See IAC 2013 Recommendation, at 2.

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