Proxy Access by Private Ordering: A Review of the 2012 and 2013 Proxy Seasons

November 2013

Publication| Corporate Transactions| Corporate & Chancery Litigation

Although the process of selecting corporate directors is described in terms thattrack the political election process—director “candidates” are “nominated” and“elected,” just as political representatives are—there have always been significantdifferences between political and corporate elections. Director candidates aregenerally nominated by the incumbent directors, not by shareholders. Few corporateelections involve more than one “candidate” for any director position.And proxy “campaign” materials are funded by the corporation and includeonly those candidates nominated by the incumbent directors, although othershareholders may prepare, and circulate at their own cost, proxy materials fortheir own candidates.

In recent years, shareholder activists have argued with increasing vigor thatthe corporate election process should be more open and, in particular, that excludingshareholder-nominated director candidates from the corporation’s proxymaterials undermines shareholder democracy. Corporate traditionalists, on theother hand, have pushed back, arguing that facilitating direct shareholder accessto the corporate proxy could make corporations vulnerable to special interests,increase the pressure on boards to focus on short-term rather than long-termshareholder value, and result in fragmented and ineffective boards.

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