Negotiating about who gets which color on a proxy card is always an odd highlight of a proxy contest. Company counsel, activist investors, proxy solicitors, and corp gov aficionados understand this, while others just puzzle over different colored scraps of coded paper. Thanks to new SEC regulations mandating a universal proxy card (UPC), this nominally interesting artifact of a baroque, obsolete proxy plumbing system will go away starting later in 2022.

UPCs will change how activist investors solicit proxies for director elections and likely lead to both more proxy contests and more activist directors. Activist investors will need to decide how to comply with some specific rules about how many proxies to solicit, and how much they wish to streamline the solicitation process by relying on the company UPC.

Here, we explain the nature of the change, identify specific highlights that companies and investors should know about the new regulations, and explore some of the implications and decisions for companies and investors.

Who has the blue card?

In November 2021, the SEC adopted long-awaited rules about UPCs. The SEC worked on this for many years, and first proposed these regulations in 2016 (we wrote about UPCs in 2015). Essentially, companies and activist investors will each include identical content in proxy cards. Specifically, both company and activist proxy cards will list all director nominees from the company and activist.

Until now, a company and an activist each send their own proxy card, listing only their director nominees. This confuses shareholders greatly. Individual and even institutional shareholders can’t keep straight the company and activist nominees. Among other weird consequences, each proxy card has a specific color, like blue or gold, so shareholders know which one belongs to the company and to the activist.

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