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As some of us celebrated the new Jewish year of 5786, we sat in synagogue pondering Abraham’s near sacrifice of Isaac, and, as our minds drifted, the SEC’s recently promulgated Exxon no-action letter.
Between the Exxon letter, which allows the oil giant to canvass retail shareholders in advance of a vote to secure pre-approved support, and the rise of pass-through voting, issuers are now mulling whether to rethink their investor relations and PR strategies around retail shareholder voting.
Here’s Skadden’s take on the Exxon letter, which suggests the SEC is open to similar programs elsewhere.
Conventional wisdom has held that the retail vote only matters in close elections and that the juice ain’t worth the squeeze in the cost of a retail get-out-the-vote. As long as the major players vote, and issues can get their quorum, no need to spend additional time and money. And proxy advisors note how hard it is to get retail to vote.
But now the tide may be turning, and corporates may need to rethink their strategies.
Issuers can look to successful campaigns from the likes of The Walt Disney Company to cater specifically to retail shareholders in its successful defense against Trian (this Ludwig Von Drake video). Other companies are building out retail-oriented platforms to communicate to individual investors (Pfizer’s retail shareholder website), and mapping where the retail base sits geographically to run a get-out-the-vote campaign.
In the Exxon case, advisors who work with activists believe this is a back-door way to help boards over activists in any campaign. Andrew Freedman of Olshan penned an op-ed in The Wall Street Journal this week making that point, and The Deal also explored potential implications.
If issuers can pre-register friendly votes, then it’s about creating campaigns ahead of proxy season to have the votes in the back pocket.
We spoke to Okapi Partners’ Bruce Goldfarb, who regularly works with companies and investors, who commented: “One big issue in the context of shareholder activism is whether a retail investor will want to override the standing instructions in a proxy contest. In a contest, management may have a real head start by implementing this process.”
Shana Tova (Happy New Year) to all, hoping for a peaceful year.
GPP Team
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