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Shareholder Primacy
2026 Predictions with Matt Moscardi + Damion Rallis of the Proxy Countdown podcast
01:03:13
2026 Predictions with Matt Moscardi + Damion Rallis of the Proxy Countdown podcast
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- [00:03]
A
Welcome to Shareholder Primacy from Free Float Media. But also a very special Free Float Media crossover episode. As followers usually know, Shareholder Primacy is a podcast about activist investing, securities law, and all the ways the financial and legal rules intersect and collide in real life. I am here with what, Matt Moscardi.
- [00:24]
B
Yeah.
- [00:26]
A
Matt Mascardi is a co founder. Okay, hold on. Matt Muscardi is a co founder of Free Float Analytics. He's coming to us from Connecticut.
- [00:34]
C
I'm here with Ann Lipton. I brought Ann with me this time instead of with you. Ann Lipton, who is a law professor at the University of Colorado who researches and teaches securities and business law. See, I can read the script, too.
- [00:48]
D
I'm here with Damian Rollis, the other co founder of Free Float analytics, coming to us from Port Portland, Maine.
- [00:58]
B
Yeah. And this is also, let's not forget, this is also the proxy countdown for the week of December 15th. Right. We're part of this, too. This is our show.
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A
It's a straight crossover.
- [01:08]
B
It's a crossover, man.
- [01:11]
D
We're doing something very special.
- [01:12]
B
Despite Mike's lead off. We're all hosts. We're all together.
- [01:16]
C
Hug. It's a free family hug.
- [01:19]
A
This is our holiday party. Yes. All right, Damian, what else?
- [01:25]
B
Yeah.
- [01:25]
C
What are we covering today, Damian?
- [01:27]
B
Well, I can tell you what I'm covering in my segment. I'm going to ask very simple question. I'm going to ask you all to give me predictions about the upcoming 2026 proxy season, which is really kind of changing every day.
- [01:41]
C
Yeah. Literally there's a lot of stuff going on.
- [01:45]
D
Yeah.
- [01:45]
C
My calendar, did they cancel it yet?
- [01:47]
B
So I'm going to simplify it and ask you to just kind of give me some guesses and some estimates, some numbers. Right.
- [01:54]
C
Before we do that, Mike's going to do some stuff.
- [01:56]
A
I'm going to. Yeah. What?
- [01:57]
B
I can do it to me. So.
- [01:59]
A
I know, but let's, let's, let's start with some, some of what happened in 2025.
- [02:08]
B
Wow.
- [02:09]
A
That, that kind of gives us a little bit of. I'm going to go to the context and grounding. Feel free. Grounding about what we saw. Anne and I have spent a whole year tearing down all sorts of really fun developments and activism and regulation and securities law and shoulder proposals. And so we were thinking we would kind of go back and look at some of this and understand some of our thoughts, opinions, interpretations of what took place and then use that as sort of a jumping off point for a look at what lies ahead. Sounds good, everybody.
- [02:46]
B
Yeah.
- [02:47]
C
So this is like a, this is like a best album of 2025.
- [02:51]
B
A wrap up review. Spotify.
- [02:54]
C
Yeah, wrapped. Spotify wrapped. Got it.
- [02:56]
B
Sorry.
- [02:57]
A
Right, well, let's begin with some, some interesting events. For me, one of the biggies was the Tesla AG AGM Annual General meeting. Annual general meeting. Borrowed from our, from Western Europe. I always used to call it the annual shareholder meeting, but I reformed. The Tesla AGM took place this past November. And in addition to seven or eight shareholder proposals from various proponents, there were some company proposals. And the biggies, of course, was kind of ratifying the king. The king, the big shot, the techno king. Techno king. His pay package and awarding him a brand new pay package. And I know we're going to talk a little more about what that means for them and others, but that was kind of fun to kind of track that and to sort of see how that emerged, wasn't it?
- [03:54]
B
It depends on definition of fun.
- [03:56]
C
Yeah, yeah.
- [03:57]
A
Okay, so some versions. Ann, you, you enjoyed it when we talked about it.
- [04:01]
D
Well, I mean, you know, Tesla is, you know, is, is an ever never ending source of amusement for horror for, for, for, for business law professors. I mean, it's never boring. We can, we can leave it there.
- [04:13]
B
True.
- [04:14]
D
But you know, what we saw was of course, Tesla shareholders voting to restore his old pay package, should the Delaware Supreme Court uphold the Chancellor's decision and to give him a new pay package that would up, give him essentially up to a trillion, A trillion dollars or in stock if he meets various milestones. And you know, from a legal perspective, the entertaining part of that was that Elon Musk and his brother both got to vote on those proposals because Tesla has made it impossible for shareholders to sue now that they've moved to Texas and.
- [04:49]
A
Right, and it took place, the vote took place under the laws and auspices of Texas corporate law.
- [04:55]
D
Yes, but they're not gone from Delaware because not only the pay package thing, that's still under review by the Delaware Supreme Court, we'll probably get a decision within the next month, but, but also shareholders, before they left for Texas, like just under the wire, filed new actions against him and the board, and those are still pending before Chancellor McCormick.
- [05:13]
B
Does Delaware's decision even matter at this point?
- [05:17]
D
It does, because if they don't restore the pay package under Delaware law, if now that the shareholder vote is what gives them his pay package back, the tax and accounting implications are, they're horrifying. So Tesla really wants Delaware to just reverse McCormick because at least that way they get the pay package back without having to deal with how this plays out for tax and accounting purposes.
- [05:42]
A
Right, right. I mean from, and from Musk's perspective, the tax hit on him is going to be a big deal too. So there's an enormous accounting, assuming that and I don't know, and we've talked a little bit about, you know, what's going to happen and who's going to win and what's the chance recourse going to do and nobody quite knows. I've asked you many times and you refuse to guess.
- [06:03]
C
But is it fair to speculate that Musk himself is worri about it, given that he literally just this week is talking about IPO for SpaceX, preparing IPO for something else.
- [06:14]
D
But I have no doubt it will not be a Delaware company.
- [06:17]
C
Not only will it not be a Delaware company for sure, but he definitely is going to come out like he's going to have $1 trillion in, in options there.
- [06:27]
D
It's going to be, it'll probably be a dual class. It'll be, probably be a Nevada. SpaceX is right now a Nevada company. He'll probably stay in Nevada. I mean he might switch to Texas, but it certainly won't be Delaware. I imagine he'll go public with a dual class share system because one of the things that really upsets him is that he can't get high vote shares at Tesla. And the reason he can't is because once you're already listed you can't switch to a high vote system. But he can totally go public with a high vote system. So I would expect that.
- [06:53]
A
Yeah, he likes, he envies all the other techno kings that have these dual class share structures because let's not forget
- [07:02]
B
he's not an actual founder of Tesla. He was not there at the beginning. He just, he pretends to be a founder.
- [07:09]
C
A little ironic that he like envies dual class shares given that as and you said that he and his brother are voting on 20 plus percent of the shares already that they own to vote. And you know, he basically has a die hard legion of retail fans that own 40.
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B
But he has to fight for it, Matt. It's embarrassing. I think Mark Zuckerberg fighting has to
- [07:31]
D
go out and flog the vote. Exactly.
- [07:33]
B
Flog the vote.
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D
He has to promise tours of the time.
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B
It's emasculated.
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C
It's emasculating.
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B
I mean really, it might be actually. Yeah.
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A
All right, all right. There's other things we got to talk about. We'll return to this. Another thing. Part of the problem is all this stuff was stacked in like the last quarter. Another thing that happened, it was only two months ago, was ExxonMobil. Exxon Mobil now is trying to get irrevocable proxies, though they're not called that from all sorts of retail shareholders. We still call perpetual shareholders though. And somebody here had another good word for it permanent. Anyway. So it's perpetual proxies.
- [08:15]
D
Yeah, it was perpetual. Yeah. So basically Exxon is going to try to lock in retail votes in favor of, of its. Of anything that management supports. They're revocable. But you know, the assumption here is that retail shareholders tend to be sticky because they tend to not pay attention. So once they sign away, they're voting to the management, it's likely to stay that way.
- [08:36]
A
They'll forget about it. It's like, it's like subscribing to something.
- [08:39]
B
Yeah, gym membership. Right,
- [08:43]
A
exactly. Except, except it's how you vote your ex on mobile shares they're counting on. There's a very interesting behavioral economics, you know, set of theories about how this is going to work for them. So. And it was.
- [08:53]
D
We haven't seen as other companies, as far as I know, I mean the big question was whether other companies would adopt a similar program. And I am unaware of that happening.
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A
Right.
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D
Which is interesting.
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A
Go ahead, somebody.
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B
I was going to say, this is, this is what I'm most fascinated with too. And it's a bit of a tangent here. But, but, but given that the ease to which we can now. Companies can now restrict shareholder proposals from their ballots which, which companies will go the other way and say, no, I want to know what the shareholders think. We're going to put these on the.
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A
Oh, no, no, no, no, no, no, no. They, they do stop you.
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B
Right.
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A
They do not want to know what you're.
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C
We'll see.
- [09:31]
B
We'll see.
- [09:32]
C
There could be. Costco did Costco.
- [09:34]
D
Did Costco. Did they just.
- [09:35]
B
Costco clearly. What did Costco do again?
- [09:37]
A
What did they put out?
- [09:39]
D
Yeah, they got an anti ESG proposal, an anti woke proposal which they sought to exclude before the SEC changed its policy. And so the sec, with that request to exclude sitting on its books, just refused to answer. And Costco could have left it off. I think that would have been minimal risk for them, but they chose not to and they're allowing it to be voted.
- [09:59]
A
Oh, oh, interesting. I didn't. Because we've tried. Go ahead, Matt.
- [10:02]
C
Of course, of course it's Costco being the first one.
- [10:05]
A
Yeah.
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C
The only, the only company.
- [10:07]
B
The only company with a voice playing
- [10:09]
C
by some Set of rules that nobody else is playing by. But, but practically when you're talking about Exxon retail vote capture.
- [10:15]
B
Right.
- [10:17]
C
What's the practical outcome is basically the same. The only thing that this would have changed historically would have been maybe the engine number one activist campaign in 2021. 2020.
- [10:29]
B
That's a big one.
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D
But that's, that's, I think that's a big deal. Like I mean there was a report in Financial Times, Sujeet Indaps, he I think with other co authors where they were saying that that really stood stung more than I would have realized that boards like saw that and they're like still mad about it.
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B
Yeah.
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A
Right. Even though, even though all those guys are co opted at this point.
- [10:51]
D
But they're still there.
- [10:53]
C
They're still there. The following. They voted. The same directors that got voted on by engine number one were on board suing Arjuna Capital one of their shareholders rather than going through the SEC process. Those same directors, they actually the next year they diluted the, the directors by expanding the board size and adding their own directors. Anyway. It's actually confounding that that A stung anybody or hurt their feelings that much and B the practical outcome of getting the vote share from the retail is they no one was voting out anybody to begin with.
- [11:26]
B
You're taking the emotion out of it which is that it wasn't their decision in the first place. Yeah. I mean again it's emasculating.
- [11:33]
C
It's amazing.
- [11:34]
D
Well, it is because remember I'm beginning to think you're right that that is the well, most explanatory power of any theory of crypto.
- [11:42]
B
Because we analyzed the people that Engine 1 put on and really they were all basically the types of people you would expect on Exxon's board. They weren't these crazy environmentalists so they were just upset that it wasn't their decision in the first place.
- [11:57]
A
Yeah. Oh wow. All right. So Exxon Mobil did that. We're wondering and we can talk a little later about whether anybody will follow. I, I do know that Davis Polk has been very busy fielding inquiries. They're the ones who kind of help
- [12:13]
C
cook this, that insider knowledge that's, that's like.
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A
No, I just heard, you know that they're lots of calls the Davis Polk. No, just. Anyway, other things that happened. It was actually there was no really unbelievably high profile, high stakes proxy content test in calendar 2025.
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B
Not like Disney, right?
- [12:40]
A
No. Yeah, correct. Not like Disney, not like Dow, not like those were, you know you know our friends and I have friends there at Elliot Management.
- [12:51]
B
I don't have friends at Elliot. I'm just going to put that in the record.
- [12:54]
A
Yeah, no, I know some of the folks there, they're, they're, they're, they're aggressive, they're kind of sharky but they have limited partners they're trying to make a lot of money for and they got involved in a proxy contest which was notable for a reason at Phillips 66 Phx, right. Where they won two out of four board seats in a board election notable for two things. First, it was the first time in memory and I think possibly ever that Elliot started soliciting proxies for a proxy contest. Normally they are so feared and so good and so aggressive. I can't remember it's been first time in a long time and they may have done one years ago and one of the first time for sure that they'd ever taken one to a vote and they got two out of four seats and it's a testament to universal proxy how that allowed that. It's worth noting Phillips had a class one of the only one of the remaining S&P 500, at least big S&P 500 companies with a classified board so they can only go for four seats. And so, so Elliot, and then Elliot of course was doing, started a proxy contest at Pepsi just a month or two ago, but that just settled.
- [14:19]
C
They just started, they just announced 5% threshold at Toyota today.
- [14:23]
B
Yesterday, right?
- [14:24]
A
Oh yeah. I mean they're like, I mean if I had to think of a single very large feared activist that has sort of assumed the, the, the crown, the mantle, whatever from, you know, the, from Carl Icahn who's busy trying to you know, save his own investment vehicle and you know, the Peltzers and so forth of the world. Elliot's, Elliott's really up there. So they had those two and some others, you're right, they started Toyota and Toyota is not Toyota Motor by the way. Right.
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B
Industries.
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C
Toyota Industries.
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A
Yeah, it's there, it's a lot of Toyotas. It's a car parts.
- [14:59]
B
Right.
- [15:00]
A
Manufacturer. So Elliot was out there along with some others, but Elliot was I think the most high profile financial activist that was, that was trying to get stuff
- [15:09]
D
done and, and, but there was the other reason why it was really notable that they got the two seats which is the big three voted against them and they succeeded which really is interesting just because there was originally this chatter that the Trump administration would try to minimize the voting power of the big three in Various ways. And what this really demonstrated is that they are much more pro management. And if you try to minimize their voting power, what you're going to do is you're going to hand more voting power to activists. And that is the opposite of what I think the Trump administration wants to do. And the thing is that like, I mean, we're in such a politicized era of shareholder voting that I look at something like that and I have no idea what the arguments were or who's right, who you should have voted for in that contest. But it makes me worry that the big three are going to sway their votes essentially to please whoever the regulator is. And that's the thing about the big three, that they have so many fingers in so many pots and are subject to so much regulation that their main issue is always going to be pleasing whoever the regulators are. And that may sway how they end up voting on things. And that's my concern.
- [16:21]
A
Right, so yeah, go ahead, Matt.
- [16:23]
C
That's their pattern though. They did that, you know, like when they sort of swung, quote, unquote, air quote, left. Right. Yes, in the 2000s. It was the same, same reasoning just then.
- [16:35]
B
Actually.
- [16:36]
C
What's more interesting to me about the, the voting patterns with the activists is how the proxy advisors have been positioned with the activists. Because when it comes to a standard proxy vote, they seem to do due diligence, a lot of due diligence on shareholder proposals when they exist and then sort of vote with management otherwise is usually the general recommendation. But with an activist, it can go either way. Some management, some don't, they actually play a role. And the, and the big three voting in one direction, if ISS says the other direction also suggests that the kabuki theater around the proxy advisors may be totally overblown at their power or whatever because that those are the only situations in which you see investors on all sides and the advisors on all sides doing the due diligence, going public with it, discussing their issue and the vote comes out and it seems relatively random or arbitrary.
- [17:36]
D
ISS and Glass Lewis, they also voted against, they repeatedly recommended against the musk pay package stuff and that stuff passed as well.
- [17:45]
A
Right. So yeah, the proxy, and we'll probably talk about this a little later, but you know, proxy advisors are fending off all sorts of assaults and pressure.
- [17:55]
D
It's a whole government approach to attacking proxy advisors at state and federal level.
- [18:00]
A
Right. You know, you know, we got all sorts of stuff, even just this week, which we'll, we'll get to. So that was another thing that was worth mentioning, but I think we just kind of talked about a little bit is the proxy advisors are facing potentially more pressure than they've encountered ever before. They've been hauled before congress, they've done testimony, they've done all sorts of stuff. But I sense that this year, and you guys, Matt and Damon, you know the proxy advisor as well as anybody, at least here, this may have so far been their toughest year yet. Is that your sense?
- [18:40]
B
We talked about this this morning. I don't know what any of it is. Which part of it is real anymore. There's so much political theater spinning around that to me, I don't into Matt's point. Four years ago they were acting in a different way. As long as they're in business, they're fine. Right?
- [18:58]
A
Yeah.
- [18:59]
B
Do we think that this is gonna. Matt, you're hesitating. You think this is gonna have a profound effect?
- [19:04]
C
Take an outcome based approach to what they actually do.
- [19:07]
B
Right.
- [19:07]
C
Like what actually happens. And I'm talking about these are companies the proxy advisors are covering 10,000 company public companies.
- [19:15]
A
Right.
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C
Globally. Globally, right.
- [19:17]
B
Like which is the first problem.
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D
So.
- [19:20]
A
So already they're spread thin. Yes. Yeah.
- [19:23]
C
You can't exactly cover that.
- [19:24]
B
And it's not a scalable concept. So.
- [19:26]
C
But on average, the average shareholder proposal got what, 17% approval, right? Like so vast votes against with some exceptions like J. McRitchie and John Chavettin. And their votes might win occasionally and they're non binding so it doesn't matter. The average director gets 96% votes for. What is the practical outcome? Because that is the exact same averages as it was in 2020. And management almost always wins. It almost. It rarely ever loses. So what exactly are we angry at is what I'm confused by.
- [20:02]
B
Well, I just want to know. I, I understand what we're angry at. I understand there's a faux populism going on and I understand that it's great talking points. Right. To, to battle against ISS and Glass Lewis and to pretend that the woke left is infiltrating capitalism. I, I get all that. I just want to know how does it actually affect ISS and Glass Lewis? It's just. Right, like is it just more. They're just. There's maybe there's more they'll have to manage, there's more reporting they'll have to do. But no, tell me that it's.
- [20:31]
D
Well, tell me nothing's happened. So let's be really.
- [20:33]
B
That's true too. Right.
- [20:34]
D
Referring to. Is that like essentially the Trump administration saying agencies consider this. So the question is whether they actually do what they've said they're going to do.
- [20:44]
B
Right.
- [20:44]
D
And one of the big things that is being is on the table and they tried to do this last Trump term is essentially the only reason anyone hires proxy advisors is because if you're an asset manager, you can satisfy your fiduciary obligations to vote your shares by relying on proxy advisors. So you're an asset manager, you have fiduciary obligation to vote your shares and beneficiaries best interest, and you satisfy that by relying on proxy advisors. If the Trump administration essentially says you don't satisfy your fiduciary obligation by relying on proxy advisors, or you have to file like 50 billion stacks of paperwork in order to, then that just doesn't make it cost effective to hire them anymore.
- [21:20]
B
Okay, so. So to that point, you're correct. That could have an effect on the business of ISS and class. But to Matt's point, it won't have any effect on the voting outcome because. Because that's the theater of all this is that they don't actually have a profound effect tilting companies to the left. There's no, there's no, there's no evidence of that left.
- [21:41]
D
There's some.
- [21:41]
B
Well, whatever. To the woke. Whatever they claim.
- [21:44]
D
Well, they're claiming it's woke, but I mean, you know, Mike's theory on this is that this is really about things like executive compensation and you say esg, but really they just don't like being voted against.
- [21:54]
B
Yeah, well, to me it's about, it's
- [21:55]
C
about binding votes against cop don't matter either.
- [21:58]
B
To me. It's very.
- [21:59]
D
They adjust, they adjust.
- [22:00]
B
To me, it's very simple. This era that we're living in and now it's playing out, the proxy advisors is at the government level, it's all about taking control over regulation, regulatory agencies to give power to the, to the CEO, which is the president. And in this realm, it's exactly the same. We're just trying to. We're just giving CEOs more power. That's all it is.
- [22:23]
D
Agree more. Could not.
- [22:24]
B
That's all it is.
- [22:25]
D
There's nothing else happening at every single level. The idea is to essentially consolidate a sort of authoritarian view of the corporation
- [22:33]
B
monarchies everywhere you look.
- [22:35]
A
Okay. All right, let's. Let's talk for a minute. We've got a couple other things to cover, then we're going to take a break. All right, great.
- [22:42]
B
New one for us.
- [22:43]
A
Let's talk a little bit about developments in our favorite domicile state. Delaware.
- [22:50]
B
Oh, boy.
- [22:50]
A
And fortunately we have a Delaware scholar on the, on the, on with us. Yeah, man,
- [22:59]
C
I've been to Delaware once.
- [23:00]
D
I have never been to Delaware. What?
- [23:04]
C
Oh, no. Oh, now, now you have to take like a, like a field trip and just go take one picture.
- [23:12]
D
Embarrassing.
- [23:14]
A
Right, so. And they in particular in the spring passed a law which is an unusual way for Delaware to regulate companies anyway through statute. Usually they regulate because usually it's like
- [23:29]
D
court decisions do it.
- [23:30]
A
Right. And that law essentially made it a lot easier to be a controlled company. I would, that's how I would describe it.
- [23:42]
D
Yeah, I mean, it did. Yeah, it did more than that. But that's absolutely, I mean, just. And this is again, like Damien's point about. This is about consolidating power in a handful of people. It was the exact same thing. So basically what Delaware had done was it had said when you have conflicted transactions, like you cause your company to buy your other company, like say Tesla and SolarCity.
- [24:03]
A
Did that happen once? I think that. When did that happen?
- [24:07]
D
When Tesla, SolarCity, Oracle and Netscape or Netsuite, whatever. But, but, but basically Delaware said you're going to get sued and you're going to lose if you do that unless you put in a number of really onerous measures. Well, not onerous by normal standards. Like I tell my challenge, challenging. They still think it's ridiculous. But, but, but by Delaware standards, onerous measures to protect against these conflicts. And this new law took all that away. They made it very, very easy to engage in various kinds of conflict transactions without being challenged, which is the whole point. And for shareholders to get inside information through books and records. So it's all part of consolidating power in this hand group full of people and not letting anyone, including the shareholders, challenge it. And certainly not the courts challenge it.
- [24:53]
B
Well, to your point. Go ahead, man. It's. You said it well. Because what they're also doing, what they also announced in the past few weeks, is they want to make the IPO game much more exciting, much easier to get into. Right. And it's the same thing because we've been covering, especially this year, the companies that do ipo, and they're the same type of structure that you just described. And they're companies controlled by dual class shares by just the founders. Right. There's no one else that has a voice at these companies. They're classified boards. So it's the same thing. They're just trying to get that market going. Right. They're just trying to get Those companies launched and this is the type of company they love.
- [25:39]
D
Yeah. And Delaware just basically removed a lot of the burdens that might have been on a company that launched that way.
- [25:45]
B
Right, exactly.
- [25:46]
D
Otherwise you would have gotten a whole lot more, you know, flack in Delaware if you went public that way. But no longer.
- [25:52]
A
No longer.
- [25:52]
C
But isn't the fear overstated? Like, like the, you know, Delaware's fear was that they were, that they'd have a Dexit.
- [26:00]
B
Right.
- [26:00]
C
The mass exodus of companies out of Delaware into states like Texas and Nevada. But it, it seems like that hasn't happened. It's been mostly like Marc Andreessen.
- [26:10]
A
Well, it's mostly, I mean, it's almost all controlled companies.
- [26:13]
D
Yeah, it's all control companies. But I mean, part of that is because Delaware changed its law. I mean, I, I, we may very well have seen more had Delaware not changed this law.
- [26:22]
B
I mean, how many have we seen? Do you know?
- [26:24]
A
Yeah, 30 or 35. 30 or 40.
- [26:26]
D
Bunch, a bunch of micro cap companies. They haven't gone to Texas though. They've gone to Nevada, most of them.
- [26:31]
B
Is that right?
- [26:31]
D
Yeah. Ben Edwards has been keeping us sort of running.
- [26:34]
A
Ben Edwards is a law, law professor at the, where at the University of Nevada.
- [26:40]
D
He's in Los Angeles, but yeah, so at unlv. So yeah, he, so he's keeping a running tally. A lot of smaller companies, mostly controlled companies, have been moving mostly into Nevada. But I think Delaware sphere wasn't just public companies will move, although that was part of it. It was new companies will not go public in Delaware. So we may not have great insight.
- [27:05]
A
I mean, if you look at the Delaware incorporation data, in my opinion, that fear was way overblown because there's like Delaware gets tens of thousands of new incorporations a year and VCs routinely say if you're incorporated somewhere else, you need to start in Delaware.
- [27:26]
D
Yeah. I mean, my view is probably that there was a real risk and probably some of the law had to change, but it was extreme what they did. And I don't really buy that they had to go that far in order to keep incorporations. I believe that they had to do something.
- [27:40]
A
All right, there are other developments we've talked about in passing here about the changes at the SEC on how it's going to deal with shareholder proposals. There's a few other things that we will probably hit up momentarily and I would suggest that we should do that after a quick break. Everyone okay with that?
- [28:09]
C
Let's do it.
- [28:10]
B
Thumbs up.
- [28:10]
A
Cool. All right, we're going to Take a quick break, and we will talk about what we learned from all these developments in 2025 and how they will unfold in 2026 here at. I'll say Shareholder Primacy and at Proxy Countdown Proxy.
- [28:25]
B
Oh, Matt, that was weak.
- [28:27]
A
That was beautiful.
- [28:29]
C
Shareholder Primacy is brought to you by free flow analytics.com the only free database of corporate directors, their influence, and their performance. If you own a stock or retirement plan, go to free flow analytics.com and look up which of your elected directors are performing well and which aren't. Use your vote in the alternative democracy and get your data@freeflowanalytics.com now back to the show.
- [28:56]
D
Welcome back to the Shareholder Primacy Proxy Countdown crossover. I'm Ann Lipton, here with Mike Levin, Matt Moscardi, and Damian Rollis of Free Float Analytics. Damian, I'm supposed to say what's up? But I'm not gonna say what's up. I was looking forward. Yeah.
- [29:12]
B
I was looking for informality. Oh, don't get me going on complaints. You know what? I. I'm gonna. I'm gonna keep this optimistic. And to that end, I want to hear. I want to hear predictions for next year lead us. You're all looking at me with stone disbelief.
- [29:30]
A
Hopefully my LPs will make a lot of money. How's that?
- [29:33]
B
Okay, but that's. Isn't that always your prediction?
- [29:35]
A
Yes. Right. Or that's my. That's my aspiration. I'm a food.
- [29:39]
B
The reality is I want to dumb down the conversation and I want to thank God. Yeah, Smart for us, but. Okay. I've done my best to kind of categorize this into three different categories. Directors, shared proposals, and pay. And I want to just get in. There's no pressure here. We don't have to do this systematically. But I'm going to throw out a question. I just want to. Just want to get where you're thinking about where the. The proxy season could be heading in 2026. And I want to start with director votes. I know, Matt, you love to talk about director voting.
- [30:12]
C
I do.
- [30:12]
A
Oh, that's your guy's business, man.
- [30:14]
B
Come on.
- [30:14]
C
I love it.
- [30:16]
B
So the theory, not just with us, but I've seen the theory in a lot of reporting, is that if there is a drawdown of shareholder proposals, then the natural focus point has to be what has to be directors. Right. Because they're really the only proposals that will be left until they get rid of them. Because we, of course, we predicted they're going to get rid. There'll be an auditor vote. There'll be a say on pay vote at most companies and there will be a director vote. So Matt and I'll start with you. Are we finally going to see directors voted out of companies this year and not just for the J. Hogue reason, which is that they failed attendance? Will we actually start to see pressure on directors because they can't, they can't exercise their conscience on shield proposals anymore? What do you think?
- [31:04]
C
Well, so two things are true, right? Like we have to discern between activists campaigns and regular old votes.
- [31:12]
B
Answer any way you want.
- [31:14]
D
Activism.
- [31:14]
C
Yeah, yeah, exactly. And, and, and then number two, the historical data on it, 0.2% of directors historically get voted out.
- [31:25]
B
Right.
- [31:26]
C
Globally on an annual and meaning they lose.
- [31:29]
A
They have less than, less than a majority of shares in attendance at the meeting vote for that director.
- [31:37]
B
It doesn't mean they actually lead the board. Right. It just means that.
- [31:39]
C
Right.
- [31:40]
A
That's the whole, that's a whole zombie situation.
- [31:42]
C
That's, those are the directors that, that get less than a majority and may or may not stick around. Jay Hogue is a perfect example of somebody who stuck around twice after getting less than a majority.
- [31:51]
B
Right. Netflix. Right.
- [31:53]
C
So that is our backdrop. And the question then is in 2026, do we see more than that? Do we go from 0.2% to 0.3% or, or even 0.4% if we're really lucky? I, I, I can't imagine investors move that fast. I don't think so. I mean, I know there's not going to be anything else to vote on, but I think they're terrified to vote on anything. When you look at, particularly given with the earlier in the year There was the 13G 13D guidance about how about
- [32:26]
A
how they, about how you influence on how shareholders interact with the companies because they don't want to file 13D and Commissioner Uada.
- [32:35]
C
And you wrote about this, the Daisy chain problem. Right? Where, where like yeah, explain that. Because all of that kind of matters,
- [32:43]
D
it's in the new executive order. I think it is incredibly legally spurious. But that really hasn't stopped this administration.
- [32:48]
B
Most executive orders.
- [32:50]
D
Yeah, yeah. So I mean, so, so the idea here is that if you take a proxy advisor recommendation, you could conceivably be forming a group with other shareholders who take the proxy advisor recommendation. And if you form a group that holds more than 5% of the voting power, you have to file schedule 13Ds. So the idea is that this is supposed to scare investors from taking proxy advisor recommendations because they don't want to be part of a 13D group and have to file 13D's now again, I think that's really legally questionable. But you know, how hard anyone's going to fight about that to establish it is another question.
- [33:25]
C
Well, so then the question is like with. Begs two questions. If you buy a sell side report from Deutsche and so does everybody else, are you all a group? Are you like, like that's, that's the idea. The burden of proof, which I think you're right and is it's spurious in terms from a legal perspective because the burden of proof would be just what you got the information that was the same information and that's enough to form a ball.
- [33:52]
D
Yeah, yeah. So what, what you saying was that he wanted to apply it only to people who sort of automatically like just vote Robovote essentially that they just follow the recommendations without doing any analysis. I'm not sure exactly how big a group that is, but if the point is to just intimidate investors, then that's going to have the.
- [34:10]
A
It might succeed. Yeah, right.
- [34:12]
C
So. But then you're at the. Now bring it back to the director question. You have on average in the United States 20,000 directors a year that get elected on 80,000 globally that get elected on. Imagine the announce analysis needed for CalPERS, who has a staff of three to cover 80,000.
- [34:31]
D
The position of. The position of the Trump administration has been that you. It's fine if you're voting for management.
- [34:36]
B
You don't have to do a separate
- [34:37]
D
analysis because the theory being that management has fiduciary duties. So when they make a recommendation, following their recommendation is okay because they have fiduciary duties to the company. So it only works if you're voting
- [34:49]
C
against management, in which case any director that gets voted out in 2026 that doesn't involve an activist would be subject to possibly saying this is a group like you might be.
- [35:03]
A
That's, that's the interpretation.
- [35:05]
C
I can't imagine that investors are going to be able to wrap their heads around voting out directors in 2026. No matter how much I think it should happen. I can't imagine it.
- [35:14]
B
So where do the, where, where does this, the. I won't call it the anger. Where is the, the consternation of the group? Where were they going to direct it at?
- [35:22]
A
I think it's going to be directed at directors. So I think to answer the question, is it going to go up or down from 0.2.2%? I think it's going to go up 0.2. Sorry. I think it's going to go up some. I think that in the absence of shareholder proposals, a lot of these proponents are going to figure out how to get vote no campaigns going and there will be a few more directors that are going to just fall under the threshold. There's going to be enough underperforming company, remember? You got it. Most of these directors that, you know, don't get these majorities, you know, you already have. Shareholders are going to be alone happy anyway because of share price or, you know, and so, so they will succeed in nudging up the needle on that a little.
- [36:11]
B
Who will be the initial targets? Like the long, the long tenure directors?
- [36:16]
A
Yeah, long tenure.
- [36:17]
D
No, it's going to be the conflict transactions that you can't sue over in Delaware anymore. I think that's going to be it. Oh, maybe so it. Like, I mean, I'm not sure. Like, I think there are a lot of pressures here. I think if proxy advisors are like intimidated into not recommending against directors, if, you know, you have all kinds of things like that. But I think that if there is a vote no campaign tick up, it could easily be these controlled companies that no longer have to worry about cleansing their transactions through Delaware standards, etc. Etc. And the only outlet is going to be voting or, you know, voting now.
- [36:49]
A
But, but the, the outcome there will be. Even though there are going to be objectively more directors that don't receive majority votes, even in companies that have this majority vote standard that they're forced to resign and so on and so forth, we are going to have more, even more of the Jay Hogue phenomenon where the Netflix board said, jay, you committed a footfall. Just attend more meetings. Just come back, we love you. You were a founder. There'll be a lot more that. And the company's boards will rationalize this by saying, saying we understand that shareholders are unhappy and you've expressed it that way, but this director is really valuable.
- [37:29]
B
Right.
- [37:29]
A
Even though he presided over lots of destruction. Go ahead.
- [37:32]
B
It's one of our favorite lines, right, is that they say it's actually in the best interest of shareholders, despite the fact that you voted. All right, let's.
- [37:41]
A
So, yeah, so there'll be more of that. All right, I'll shut up now.
- [37:44]
B
No, no, it's fine. This is great. Let's. Let's segue over to shareholder proposals. We kind of touched on this earlier and we talked about Costco. Will there be other Costcos? Will there be companies? I don't know. Maybe as A political gesture. Maybe as a gesture to their shareholders, maybe as a. Just. Mike, go ahead, Ann.
- [38:03]
A
And I just. So I, you know, I have my substack. Whatever, you know, I write about this stuff and right after the SEC issued or. It was not Atkinson's speech, it was the, the statement. I think he called it a statement. He said, we're not going to really. We're not going to participate in the 418A8 proposal process. I said in a post, it's a big deal. I think Companies like the 1488 no Action Letter cover and they will not change how they do this as much. I think I was wrong.
- [38:38]
C
Wow.
- [38:40]
A
I know. I think that there are a lot of companies that, you know, any company that was seeking 14A8 relief for shareholder proposals, which is a lot, are going to continue to do that right now. There's, I'm sure everyone's seen this. You know, the sec. The SEC really cleaned up. They stood up a great little website on shareholder proposals. They're really responding to this stuff really quickly. If they only were as good at protecting and prompt and diligent protecting investors as they are protecting companies, it would be really great. There are, I think, nine or 10 examples now a week later, and it's kind of a little quiet at the time of companies that originally sought no action relief under 14A8 redid their request in the past, like week or two. And within a day or two, the SEC said, yeah, cool, you know, feel free to exclude. And that was, that was a, you know, and so I think there's a lot of companies that had been submitting these will continue to. So there are going to be many fewer, half as many or worse. You know, so there were. The number I carry in my head is like eight or nine, but 900 shareholder proposals at U.S. companies and 2025, there's going to probably be.
- [40:05]
C
That sounds right.
- [40:06]
A
Three or 400 or fewer.
- [40:07]
D
Yeah. I mean, because the big issue here is that company takes absolutely no legal risk by excluding them frivolously. They don't take any legal risk because they know the SEC isn't going to sue them. Which means they have to rely on the only one who could sue them about that would be a shareholder. Now, most shareholders don't have the resources to sue, but even if they did, even if a shareholder sued and said, you illegally are excluding my proposal, the company says, whoops, you're right, and put it on like there's no risk.
- [40:33]
B
Right.
- [40:33]
D
There's no, there's to just rejecting everything. So I think that this is going to be about. If the proposal comes from CalPERS, they'll let it be voted because CalPERS is a big shareholder. But if the proposal comes from somebody with a small number of shares, they will.
- [40:46]
B
So you think it'll be proponent based, like who. Which they'll allow certain proponents up and they'll exclude others.
- [40:52]
D
Yes. And that's part of the Costco thing. Like I have good feelings about Costco, their corporate governance and so forth. But who was the proponent on that? It was somebody who will sue you if you exclude before.
- [41:02]
B
Interesting.
- [41:03]
A
And of the 10 of the. I think it's about 10 of the 10 that are up at this SEC website now that we're all given this. I call it no objection. No objection. Relief. Nine were from our friend John Chaved.
- [41:16]
C
Right.
- [41:17]
A
Some of the basis was a little disappointing. It had to do with missing a filing deadline and not having enough shares. But some of them were on the substantive basis that the SEC usually uses to exclude like ordinary business or whatever. Which, when we go back through the
- [41:32]
C
data in 2025, the, the only shareholder proposals that really won in 2025 were John Chavet and, and Jim McRitchie, the ones who are most likely to get excluded. And those proposals were not proposals for like, oh, serve more orange juice at the annual meetings. They were their proposals like declassify the board.
- [41:52]
A
Majority voting.
- [41:52]
C
Majority voting.
- [41:53]
D
It was one that just, that just happened like it was a Chavettin declassify the board one. And it got like a huge, huge
- [42:00]
C
number of shareholders voted for it.
- [42:02]
B
And that's actually my next thought is that this happened this week Tuesday at Palo Alto Networks. Jim McRichie put up a declassified board proposal that the, that the company was against. So I want to be clear about that. Sometimes the company actually, they don't have an opinion or they support it and then it passes. To Anne's point, this is mind boggling. This, this passed a shareholder proposal passed with 93% support.
- [42:29]
A
That's insane.
- [42:30]
B
Is this a, is this, is this a bellwether proposal for next season? Like, does this say something or do you think this is only about Palo Alto Networks?
- [42:38]
C
The bellwether is right. The bellwether include everything Jim McRichie and John Cheven put on because there's high risk that it could pass and you look bad if it goes to vote and it passes, but you don't look bad if you just exclude it and
- [42:51]
B
there's no legal risk. But do you think this vote was like, is this all about Palo Alto Networks or you think this vote was like kind of oddly politically charged?
- [42:59]
A
It's in part about Palo Alto Networks, whose shares have not done, have not kept up with its other tech peers.
- [43:08]
B
Okay. Because I was going to say, I looked at their, at their five year stock price, it doesn't seem terribly down. You're saying it's not. You're saying it could be higher compared to that.
- [43:16]
A
Right. I mean, yeah, Paleo Alta Networks kind of plays in the same sandbox as the big seven and some of the others and so forth. They, they at least have aspirations.
- [43:24]
B
I will say this, that, to that. So the other thing that lost there was say on pay, a much closer vote. They got 54% no vote against. We do see some companies failing, say on pay. So I'll throw this out there. Are we going to see a lot more say on pay failures? No, again, because this is going to be one of the only things that people can vote on.
- [43:46]
A
I think, I think there's this hypothesis, it's in political science circles that, you know, it's that, you know, pressure gets expressed in various ways and companies have kind of cut off or will end up cutting off this source of pressure. So you started asking the question, you know, what's the company with the highest
- [44:04]
B
number of proposals that it was, it was meta platforms.
- [44:09]
A
Right.
- [44:10]
B
Alphabet had 13.
- [44:12]
A
Yeah, I think it's going to be many fewer. I think there'll be one or two or three. They may, you know, if companies are smart, they may allow a couple through just to sort of allow shareholders to kind of express their, whatever residual frustrations they might have on those two or
- [44:31]
B
three or to prove a point otherwise. Right. They'll use it to demonstrate. Well, since only 11% supported it, it proves why we're not doing it in the first place. Yeah, because they know it'll fail.
- [44:42]
C
I think Ant's point is the right one. They can just look at the pockets of the proponent. And John Chevadin is not going to sue you, but National Legal Policy center will.
- [44:50]
A
They might.
- [44:51]
C
Or they, they might. Especially because it's basically an arm of the Heritage Foundation.
- [44:56]
B
Right.
- [44:56]
C
Like, so they have access to enough capital that they could, if they really
- [45:00]
A
wanted to, or find a friendly, a friendly lawyer.
- [45:03]
C
Find a friend.
- [45:03]
B
Right.
- [45:04]
C
Like Ed Blum or whatever, you know, like figure out a way to sue them for discrimination. But yeah, I think that pressure question is right, but I don't think it's going to spill. I, I disagree with, with Mike that I don't think it spills over to Directors, because I think there's too much fear. We have seen votes no on pay that were substantial and 98% vote for every pay committee member, which is like, well, what are you actually saying to the company? There's no accountability here. Right. Like the, the, the vote that might be binding, which is the vote on the director you are fine with and the people who made the decision about the pay. You're just saying we don't like the pay. I mean, it's not a you problem. You chose it.
- [45:46]
D
But you know, like abstract pay, that float pay.
- [45:51]
C
Yeah, the air quote pay. Yeah. I, I think, I think, Mike, you're probably right that the pressure will redirect, but I don't think it redirects at directors. I think it's like maybe an auditor fails this year because,
- [46:08]
B
Well, for the sake of time, I think I want to move on to Matt. But before we get there, Matt, let me ask you this. Are you all just predicting the dustiest, quietest, most boring proxy season in existence? I mean, I don't hear that you think anything's really going to happen. They're going to exclude most shareholder proposals and the directors won't get the fire. And I'm not hearing that. You think that say okay will change much. So nothing, it's going to be just a big nothing. Is that what you're predicting?
- [46:41]
A
No. Financial activists, you can already tell, okay. There are right now in December, five live proxy contests. So that's where you think going to a shareholder vote? Yeah, there's gonna be a lot more of that. There's all sorts of, there's all sorts of money there. There's lots of, lots of activists that have the assets yesterday. This week. You know, Bloomberg has an annual activism conference this week. Four really good activists announced four new projects. 13D was last month or a month and a half ago. There was a bunch of projects announced there. There's gonna be a lot. I think there'll be a lot. Universal proxy made it a lot easier and people are finally getting used to how to use that. There'll be more of those.
- [47:24]
B
And my question is why? Because of the short term success we've seen in the last year or two or because of the changes we're seeing, the changes to the shareholder proposal. Why do you think? Why is there an increase?
- [47:42]
A
I think the market's going a little sideways or it's going to start to go sideways.
- [47:45]
B
So taking advantage of a sideways market.
- [47:48]
A
Yeah, that's going to help. It was again, the accumulation of successes under universal proxy kind of started to embold. Is going to start to embolden some of these activists. So at least those two factors will kind of. Will kind of lead there, which is. It's good for me and the people I hang around with. So. Yeah, I'm okay. I'm okay. All right, man. Edit that out.
- [48:19]
C
There'll be a separate file, and I'll. I'll fuse them together.
- [48:24]
B
Let me just add one more thing before.
- [48:25]
A
Go ahead, Dan.
- [48:25]
B
Before I hand it off to you, Matt, Is that. Now, Matt, you've been covering all last year, the year before that. The only really successful director against votes we see is from act when activists get involved, right? Yeah. So to Mike's point, is that what we're seeing is that. That the activists are just take. The only ones sort of shrewd enough to take advantage of a changing landscape. Is that what it is? That's shrewd.
- [48:47]
C
They're only the only ones with enough
- [48:49]
A
capital to take advantage of with the resources. Resources and the will. And the mandate from LPs, the mandate from whatever.
- [48:58]
C
Like, to be a successful activist, get change.
- [49:00]
A
Yeah.
- [49:00]
C
You need the resources, you need the ego, and you need the know how.
- [49:03]
B
Right?
- [49:03]
C
Like, you need to be able to.
- [49:05]
B
And you need some success. Right, in the short term. Otherwise you'll stop. Otherwise you'll stop.
- [49:09]
C
You got to be able to raise the capital. You got to be able to navigate the arcane legal structures. Right. And fight those. And you got to have enough resources to, like, fight every single lawsuit, you know, like.
- [49:19]
B
Right.
- [49:20]
C
You know, Jim McRichie told me straight up that when he filed a shareholder proposal at a company years ago, the chief legal counsel called him up and said, we're going to take your house. And they sued Jim McRitchie for his shareholder proposal because he asked for the Noble list, right? Like, which is the list of investors. They sued him saying it was frivolous. And the activists can handle that. Like, yeah, we're used to that. That's like, that's nothing. But if you. If you're going in with like 100 shares, right, you're out.
- [49:50]
B
You're out. All right, Matt, take over.
- [49:52]
A
All right.
- [49:53]
C
I'm gonna make this a speed round. Given the time.
- [49:56]
A
Go ahead.
- [49:57]
C
That we're at.
- [49:57]
A
I'm here for you. We're here.
- [49:58]
C
I have a witches. More likely speed round for 20, 26.
- [50:02]
B
Which is more likely.
- [50:03]
C
Which is more likely. I'm going to give you a couple of options. I'm going to. I'm going to tell you, ask you a question effectively and I'm going to give you a couple options. You pick which is more likely and we'll make it fast and simple. The first one I want to talk about is literally last night. I mean I got pinged by like reporters, you know, investors, a bunch of people. There was a, there was an executive order protecting American investors from foreign owned and politically motivated proxy advisors. Ann mentioned this, it was already on Anne's blog. And like we sort of talked about proxy advisors already. Effectively the SEC. The order asks the SEC to consider a whole bunch of things including rescinding 14 8A. Investigating proxy advisors for securities fraud was one of the things that they asked for. Investigating collusion between asset managers. Calling the idea of calling a proxy advisor a fiduciary if they charge a fee to a pension fund that was in there. So which is more likely, which does the sec, what do they have to redefine to actually do any of the things in this executive order? Because none of it is really a. That like a legal basis sort of legal adjacent, it looks like. Right. So does the SEC need to more likely going to redefine anti fraud laws? Because currently the way the securities laws and, and you correct me because you're the scholar. I'm not. But the way they currently deal with sort of fraud is there has to be a sale involved. Right? You have to deceive somebody into buying something.
- [51:47]
D
Yeah, yes and no. Well, yes, but in this interesting way. So there are basically two fraud things. There's a contingent on a sale, sale of securities and it's also fraud. You can commit fraud in connection with soliciting proxies. Previously voting recommendations. Now previously the Trump administration tried to use those provisions to regulate proxy advisors. But just this year the D.C. circuit said when proxy advisors make voting recommendation, they are not soliciting proxies.
- [52:15]
A
They're not soliciting because.
- [52:16]
D
Because the client is asking them recommendation. So therefore what's left is as you say, fraud in connection with the purchase or sale of a security. And it's not clear how voting recommendations have anything to do with that.
- [52:27]
C
So the SEC would have to somehow redefine the fraud by passing a new statute.
- [52:33]
A
I mean that's going to require, that's going to require act of Congress. Right.
- [52:37]
C
They would have to redefine what an investment advice fiduciary is. Right. Because ERISA sets out loyalty care prudence and it applies to discretion over a pension fund for a fee.
- [52:50]
D
Well, yeah, it's actually this one is sort of a mess. So the reality is that if you're an investment advisor to investment advisors. They the statute essentially says you're an investment advisor if you guide biting, selling, not voting. Nonetheless, ISS has registered as an investment advisor because it just didn't want to hassle about it. Glass Lewis resisted forever. But now it's announced that it's going to register as an investment advisor anyway. So even though the executive order says we're going to make them register as investment advisors, my response is largely too late. They're doing it. So they will have, yeah, so they will have fiduciary obligations to their clients as a result of that registration.
- [53:29]
C
But the way this is written suggests that anybody who gives them like, like if you give them a dashboard that says, you know, like, you know, donut holes, you know, are 3 inches in size on average, then you have to register as investment advisor.
- [53:45]
D
Yeah, well that's the thing that like they're doing it voluntarily. It's unclear how much force needs to happen. But the thing is that Glass Lewis especially is not really. They don't even call this a recommendation anymore. What they want is for their clients to develop their own custom policies. We will vote down board members who don't attend X number of meetings, whatever it is, and then Glass Lewis will just implement it. Like that's your criteria and we will implement it. And they don't call that recommendations at all.
- [54:13]
A
Right.
- [54:13]
C
So then the last you know, that means the SEC's more. Are they more likely to redefine what ESG is?
- [54:21]
A
Because I think that's, I think that's
- [54:23]
C
where they're going to go and they've included. But they forget that there's a G in esg. Is it G?
- [54:29]
A
No, no, no, no, no. They don't forget that. That's they're well aware of you might be.
- [54:35]
C
Right, right. Like, but, but that means every activist is woke because all an activist investor
- [54:40]
D
does is that is what Texas did. Texas is law right. Now, Texas passed a law that said ESG advice is by definition non financial, no matter what it is if it falls under esg, including governance.
- [54:54]
C
So that's how they get them. They basically say if you give any governance, in which case the proxy advisors, there's no way around that.
- [55:01]
B
Right.
- [55:01]
C
Like they do is government.
- [55:03]
D
So what we're looking at, I mean, I think what's likely is something like the sec, first of all. Well, you're registered investment advisors now. So what we're going to do is we're going to make sure that you have to like leap 50 hurdles and disclose all your trade secrets. Before you can be said to have met your fiduciary obligations, which is to the extent they have to disclose internal whatever, that's actually a real problem. And then what they do on the ERISA side is as I said before, they tell the ERISA pension funds if you rely on proxy voting advice, you are violating your fiduciary duties unless you also do handstands.
- [55:37]
B
Here's what I don't understand. Why does it. If you're presenting your client with like say five different options. Let's just say and maybe I don't know how you present the options. It could be pro management, they could be on a political spectrum, whatever. And you just have them choose. You just have them choose. How is that advice?
- [55:55]
D
Well that's exactly. That's why Glass Lewis is giving you that.
- [55:57]
A
That's why they're doing it exactly that way.
- [55:59]
D
So they're getting out of the advice business. They are going to do entirely. You define your own policy and we just, just implement it.
- [56:05]
B
But it's never. But it's always been this. Because they've never forced their clients to vote anyway. Like it's just. They're just. That's why. Well that's why that is all that.
- [56:13]
A
That's the big. Exactly. That's the big problem is that the proxy advisors essentially reflect and channel their investor clients preferences right in very.
- [56:26]
C
I don't think you understand. When you go to a cracker barrel the menu is advice.
- [56:31]
B
Okay, that's true actually. That might be true actually. I like that.
- [56:35]
C
All right, next. Next up and is it. Which is what's more likely? All right, Musk's. We already talked about Tesla agm, Musk's mega pay package, his extra trillion payback.
- [56:45]
A
Kimball Musk.
- [56:46]
C
Is it more likely to open the floodgates to mini Musk packages? Are we going to see like we
- [56:53]
B
already billion dollar package.
- [56:54]
A
We saw a couple of them.
- [56:55]
C
We saw a couple of them already Rivian a couple.
- [56:58]
D
But as I understand a lot of those they didn't meet meet their goals. So I don't know how much CEOs want them. Because the whole point is you get nothing if you don't meet outlandish goals. And it seems like some CEOs over
- [57:09]
C
predicted so then like do. But, but in the key in Musk's was actually that according to like when you read the fine print it says if the board deems the outcome to be outside of the control of Musk or the company, they can just waive that magic.
- [57:30]
D
What they can't do that with the
- [57:31]
C
stock prices, they can't do that with the stock price. Correct.
- [57:34]
D
And Musk, shall we say has a unique ability to at least temporarily rally stock prices.
- [57:42]
C
That is, that is the greatest description of mean stock king I've ever heard.
- [57:47]
B
Ability to manipulate the market. Yeah.
- [57:49]
C
Will we see is or is it more likely to push investors to vote against pay everywhere? And we already talked about this. But, but if Musk's mega pay package, you know, Mike, to your point, the pressure builds. You can't vote on shareholder proposals. You can't vote over here, everything looks bad.
- [58:06]
A
And now vote against pay.
- [58:07]
C
I'm just voting against pay. Just vote against all of it. Just make it our policy that no pay like because it's non binding anyway. Like do we just see more of that or do we end say on pay entirely?
- [58:18]
A
Is a pressure on Sandpeace not ending. It's, it's, it's in the law. So that's.
- [58:23]
C
But you could, you could, you could not end it like statutorily. You could end it practically by saying we're going to have say on pay votes every three years that are non binding as a, as a default rather.
- [58:37]
B
Shareholders have to agree to that.
- [58:39]
D
Yeah.
- [58:39]
A
Yes.
- [58:40]
D
I don't think if they don't, I mean it's a question of how valuable shareholders find this. Right. And whether they, you know, want.
- [58:45]
B
That's true.
- [58:46]
D
As a way of expressing their anger.
- [58:47]
B
And is there any value in it? Because again, they're not, they're not bound to make any changes based on these. And what we have tracked this year, an alarming increase that we've seen in a case is these one time awards go there. Right. Like outside of the purview of the normal pay policy they're just kind of tacking on.
- [59:10]
D
And here's another, that's an interesting way of avoiding say.
- [59:13]
B
Right.
- [59:14]
C
It's, it's been fabulous because even when there was a case this year where even when they gave a retention bonus and investors voted against pay, they apologized but didn't take back the retention bonus. Like they just said, sorry, that was a one time thing. That was a one time thing. We're going to go back to normal next year and then like two years later they're going to do the same one time thing again.
- [59:39]
B
So I will say this. The unintended consequence potentially of, of removing shareholder proposals from this world is an increased scrutiny on the issues that we're talking about right now, including director performance. It's possible that that scrutiny could go to these to pay packages. It's possible.
- [59:59]
C
You're such a. Yeah, right.
- [60:00]
B
I know you're skeptical, but I mean
- [60:03]
D
there could be other steps before then because remember the main, I mean anything could happen with shelter proposals. But the main thing that's on the table is eliminating precatory ones. Ones, the non binding ones. So the real thing to see is how much shareholders then move into binding ones.
- [60:18]
A
How much they move into by like bylaw amendments.
- [60:21]
D
Love. Starting with, starting with bylaws that permit shareholders to make predatory proposals and then moving on to wherever else they can go.
- [60:29]
A
Wow.
- [60:30]
C
You just blew my mind. All right, let's, let's end on this one. Let's end on this one. Which is more likely the Daxit winner?
- [60:39]
B
We already know this from Anne.
- [60:40]
C
We, we, we think we know. But here are your options. I'm just going to list them. Nevada, Texas, Delaware or no one. No one wins in Dexit. Which one? Which one of those four is the
- [60:51]
B
big winner deferring to Anne on this one?
- [60:53]
D
Well, I'm going to say it's not Texas. I keep saying this. Texas winning this race.
- [60:57]
A
I'm going to say it's Delaware. Delaware. Delaware is agile.
- [61:01]
D
Yeah, they, yeah, they've, they've, they've alleviated the concerns.
- [61:07]
C
I know one, because it's a race to the bottom when it comes to everyone.
- [61:11]
A
Oh, well, there's that. So wait a second, wait a second. The loser here, you asked who the winners. The loser here is investors, shareholders.
- [61:19]
C
Yeah, that's true. Yeah, I think there's, I think there's no winners in the end. In the long term. That's all I got for my segment. Damien, do we, do we have any, do we have any final thoughts? And before Mike rolls us out, Pippi 2026.
- [61:36]
B
My real question is how come we've never done this before?
- [61:39]
C
Yeah, this was.
- [61:40]
A
Oh, that's a very good question. We could do this as frequently as we want.
- [61:45]
B
Maybe a biannual.
- [61:47]
A
We'll do one after. And you know I hate calling it proxy season.
- [61:52]
C
Yeah, I know you do.
- [61:53]
A
This has always been something that bugged me, but again, I've given up. So maybe after proxy season we'll get back together and see what this is like. We'll do a little wrap up sometime in the spring. Spring. Late spring. All right, cool. This has been both shareholder primacy and, and proxy countdown, hosted by Ann Lipton, Matt Moscardi, Damien Rollis, and me, Mike Levin. You know, I'm an independent activist investor, answer professor of law. Matt and Damien founded Free Float.
- [62:28]
C
Just a couple dudes me Free Float Analytics. They found us under a 95 overpass, right?
- [62:34]
A
Real quick. You can find me Mike me mike@theactivistinvestor.com and is at Law Colorado. Edu. Matt and Damien are at Free Float One Word LLC. Go there and as Matt loves to say, get your data. Our podcast is produced and distributed. Thank you Matt by Free Float Media. Matt is our the wizard behind the curtain in our in our podcast production. For the followers, at least of shareholder primacy, they don't know that Matt's the guy who makes the trains run on time here. Thanks for listening and we will see you again in 2026.