Reforms May Redraw Battle Lines in Proxy Fights

Even as baseball card maker Topps was squaring off with activist shareholders at its annual meeting on Friday, a prominent law firm was predicting a big shift in the landscape of such proxy contests. “The convergence of three strands of reform appears poised to change the mechanics — and perhaps eventually the results — of shareholder voting in director elections,” lawyers at Wachtell, Lipton, Rosen and Katz, an adviser on many big Wall Street deals, wrote in a recent article that appeared in the New York Law Journal.

Reason No. 1: The New York Stock Exchange has proposed a rule banning broker discretionary voting in director elections. No. 2: The Securities and Exchange Commission may relax rules governing electronic delivery of proxy materials. No. 3: There is “growing momentum” toward a standard of electing directors based on a majority of votes cast rather than a plurality.

“Taken together, these reforms could significantly increase the power of activist shareholders in influencing director elections,” states the report. The upshot, if this theory holds: Expect more proxy fights.