Voglio sapere a riguardo di…

68372

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

dissidents,372 but did not receive much support from commenters in favor of such an alternative.373 By contrast, we received significant support for a minimum solicitation requirement on dissidents when mandating the use of universal proxies in director elections, generally based on concerns related to the risk that dissidents could otherwise freeride on registrants solicitation efforts and launch potentially frivolous contests without meaningful solicitation efforts of their own.374 We share these concerns and continue to believe, for reasons discussed in more detail in the Proposing Release,375 that without such a requirement, dissidents ability to introduce an alternative set of nominees to all shareholders on registrants universal proxy cards without incurring meaningful solicitation expenditures may result in an increase in frivolous contests that do not enhance shareholder value. Such contests could also cause registrants to incur significant expenses to advocate against the dissidents position and could distract management from critical business matters. However, we acknowledge that by imposing a minimum solicitation requirement it may make some otherwise beneficial contests cost-prohibitive. We believe such instances will be rare, as dissidents in most typical contests already meet the solicitation requirement, or, in the few cases they do not, we estimate they face relatively limited increases in solicitation costs to meet the requirement, as discussed above.
Although some of the commenters in favor of the solicitation requirement also supported the proposed threshold of a majority of the voting power, other commenters in favor recommended higher thresholds, such as two-thirds, 75%, or 100% of the voting power.376 In the Proposing Release we considered the alternative of requiring that dissidents solicit all shareholders,377
and concluded that this alternative could increase minimum solicitation costs to such an extent that it may reduce the incidence of nominal contests that might not be in the interests of shareholders at large.
However, we also concluded that this 372 See Section IV.D.5.b of the Proposing Release for a more detailed discussion of this alternative.
373 Only one commenter supported no solicitation requirement. See letter from Bulldog.
374 See supra Section II.D.2 for a review of the comments received on the minimum solicitation requirement.
375 See Section IV.D.5.b of the Proposing Release.
376 See supra Section II.D.2 for a review of the comments received on the minimum solicitation requirement.
377 See Section IV.D.5.b of the Proposing Release for a more detailed discussion of this alternative.

VerDate Sep<11>2014

19:03 Nov 30, 2021

Jkt 256001

alternative may significantly increase the costs borne by dissidents in a large fraction of typical proxy contests and may prevent some value-enhancing contests from taking place. In response to commenters who recommend that we require dissidents to solicit all shareholders,378 we have updated and expanded our estimations of the costs to dissidents of meeting such a requirement both for nominal and typical contests, respectively.
Specifically, we estimate that the average cost for a dissident soliciting all shareholders using the least expensive approach 379 in a nominal contest would be approximately $14,900 at companies with less than $300 million in market capitalization, approximately $26,200 at companies with between $300 million and $2 billion in market capitalization, approximately $58,300 at companies with between $2 billion and $10 billion in market capitalization, and approximately $516,900 at companies with market capitalization above $10
billion.380 These are significantly higher estimated costs, especially for larger registrants, than what we estimated above for using the least expensive approach to meet the final rules 67%
minimum solicitation requirement through an intermediary, which vary between on average $5,300 and $9,800
depending on the registrants size in terms of market capitalization.381
In addition, a requirement that dissidents solicit all shareholders would also affect the cost to dissidents in more typical proxy contests. As discussed above, we understand that in 48% of recent proxy contests, dissidents solicited a number of shareholders fewer than all of the shareholders eligible to vote.382 We estimate that, using the least expensive approach,383 it would have cost dissidents in these contests approximately an additional $9,000 to $4.0 million, with a median of approximately $37,000, beyond the 378 See
letters from SIFMA; Mediant.
supra note 262.
380 These estimates were derived by staff based on the NYSE Rule 451 fee schedule and industry data provided by a proxy services provider. See supra note 273 providing assumptions for the estimation of the average costs of solicitation at a registrant in each of four different market capitalization categories. In this case, staff estimated the costs of NYSE Rule 451 fees and postage for soliciting the average total number of accounts in each size category see supra Section IV.B.1.a for the average number of total accounts in each category of registrant using notice and access delivery, and assumed that the number of brokers and banks involved for the purpose of determination of the nominee coordination fee is equal to 84, 130, 214, and 701, respectively.
381 See supra Section IV.C.2.b.
382 See supra Section IV.B.2.
383 See supra note 262.
379 See
PO 00000

Frm 00044

Fmt 4701

Sfmt 4700

costs they already incurred, to increase their level of solicitation to include all shareholders.384 These new cost estimates strengthen our belief that requiring dissidents to solicit all shareholders would increase the costs borne by dissidents in most typical proxy contests and may prevent some contests that may be beneficial to shareholders at large from taking place.
As another alternative, we have also considered a 75% threshold of the voting power for the minimum solicitation requirement, as recommend by at least one commenter.385 Repeating our estimations above using this threshold, we estimate that the average cost for a dissident to meet a 75%
minimum solicitation requirement using the least expensive approach 386 in a nominal contest would be approximately $5,600 at companies with less than $300 million in market capitalization, approximately $6,400 at companies with between $300 million and $2 billion in market capitalization, approximately $7,300 at companies with between $2 billion and $10 billion 384 These estimates were derived by staff based on the NYSE Rule 451 fee schedule and industry data provided by a proxy services provider for a sample of 31 proxy contests for annual meetings held between July 1, 2018 and June 30, 2019. In particular, the required increase in expenses to solicit all shareholders was estimated based on the number of additional accounts that would have to be solicited among the 15 cases where all shareholders were not solicited and the applicable fees under NYSE Rule 451 and postage costs for notice and access delivery. For the purpose of the nominee coordination fee, staff also used the provided data on the proxy contests to estimate the increase in the number of banks or brokers considered nominees under NYSE Rule 451 that might be involved at the higher solicitation level.
The estimated incremental solicitation cost for each contest includes nominee coordination fees of $22
for each of the additional nominees expected to be involved, plus basic processing fees, notice and access fees, preference management fees, and postage totaling $1.57 for suppressed accounts, such as those that have affirmatively consented to electronic delivery to $1.80 for other accounts per account for additional accounts solicited within the first 10,000 accounts solicited, and on a declining scale for additional accounts thereafter. Staff assumed that half of the additional accounts to be solicited are suppressed and that none of these accounts requested full set delivery by prior consent or upon receipt of the notice because such delivery requirements may apply to only a small fraction of accounts and are not expected to significantly affect the overall estimate of costs.
Additional notice and access fees of $0.25 per account for the first 10,000 accounts, and on a declining scale thereafter, were assumed to be required for each account that was solicited prior to increasing the level of solicitation because of the use of notice and access delivery for some accounts.
The estimates also include incremental intermediary unit fees of $0.25 per account for each additional account above 20,000 accounts solicited.
This estimate does not include printing costs for the notice, for which we do not have relevant data to make an estimate.
385 See letter from CII dated Nov. 8, 2018.
386 See supra note 262.

E:FRFM01DER2.SGM

01DER2