Proxy Season Crossover

Summary

Shareholder Primacy x Proxy Countdown

Episode: Proxy Season Crossover (July 8, 2026)

Overview

This special crossover episode brings together hosts and contributors from both Shareholder Primacy (Mike Levin and Ann Lipton) and Proxy Countdown (Damian Rollis and Matt Moscardi) to review the 2026 proxy season. They analyze activist investing trends, regulatory changes, shareholder proposals, the shifting landscape of corporate governance, and high-profile company events. The episode is an in-depth, sometimes irreverent, assessment of how the interplay of activism, law, and financial markets is evolving in the US.

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Key Discussion Points

1. The Quiet Proxy Season: Fewer Contests, More Settlements

Defining the Season (00:44–05:23)

• Unlike prior years, very few proxy contests actually went to a public vote; most high-profile disputes were settled behind closed doors.
  • Quote: “There have been a lot fewer contests that go to a vote this year. …For all the attention that proxy contests kind of get…there were even fewer this year.” — Mike Levin (04:05)
• Out of 8 or 9 main contests, activists only won substantive concessions in about three cases—often just single board seats.
• The vast majority of activist gains came through settlements, not confrontational votes.

Motivation for Settlements (05:23–06:44)

• Both activists and companies now prefer settlement: activists get expenses paid and some objectives met; companies avoid adverse publicity.
• Quote: “This is not an accident. When you settle, if you're an activist, you generally get all your expenses paid, you get most of what you’re looking for. …If you’re the company, when you settle, you avoid a lot of adverse publicity.” — Mike Levin (05:32)
• Example: Lululemon settled with founder Chip Wilson, giving him much of what he wanted in exchange for personal silence.

Founders as Activists (15:27–16:30)

• Many 2026 campaigns were initiated by ex-founders or founders, reminiscent of Chip Wilson at Lululemon and ongoing campaigns by “Big Larry” at Cracker Barrel and Jack in the Box.

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2. The Evolving Playbook: From Proxy Fights to M&A Activism

M&A and Withhold Campaigns (08:17–10:21)

• Activists, blocked from nominating directors via bylaw changes, turned attention to opposing M&A deals and leading withhold campaigns.

  • Quote: “There’s an increase in these lot more interesting ones. …There was like a lot of M&A activism. There were two mergers that terminated as a result of shareholder solicitation.” — Mike Levin (08:17)

• Notably, activists successfully halted at least two mergers, but withhold votes and director contests mostly fizzled.

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3. Regulatory Shifts and Corporate Disclosure: A Retreat from Transparency

The SEC’s Withdrawal from Shareholder Proposal Oversight (17:44–19:49)

• SEC announced it would no longer adjudicate on shareholder proposal exclusions, leaving the onus on shareholders to sue if a company omits their proposal.

  • “So the big change this proxy season is companies were basically given a free hand by the SEC to exclude shareholder proposals.” — Ann Lipton (18:47)

• Evidence mounts that some companies are abusing this power, given few shareholders can afford to litigate.

Quarterly & Periodic Reporting (19:57–22:49)

• The SEC is proposing optional quarterly reporting (20:51), and a substantial raise to the threshold for “large” reporter status: from $700 million to $2 billion (21:10–22:49).
• If enacted, fewer companies will have to comply with “big company” reporting, including say-on-pay and full executive compensation details.
• “When you take this, this into account … the fact that they’re massive changes and they're all being piled up at the exact same time. …That is the part that scares me the most.” — Ann Lipton (23:20)

Declining Role of Disclosure (23:20–27:49)

• Cohort predicts a “drawdown of disclosure,” warning of a slippery slope where investor information and accountability are eroded.
• States are racing to deregulate further, challenging Delaware’s dominance and encouraging weaker investor protections.

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4. Shareholder Rights “In Theory”: What’s the Point?

Stagnant Voting & Rational Apathy (27:57–33:27)

• Lay observers would note that, for directorship and say-on-pay votes, near-unanimous support for management persists year after year.
  • “What are the meanings of these votes?” — Damian (33:25)
• Discusses whether these mechanisms matter, reflecting on “rational apathy” (31:26), where the cost of activism outweighs the typical benefit, and thus entrenched boards remain largely unchallenged.
• Rarely do director elections, say-on-pay, or pay policies result in substantive management accountability.

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5. SpaceX IPO: Locking Up Control & Testing the Limits

SpaceX’s Highly Controlled IPO (36:00–45:11)

• The SpaceX IPO is cited as a watershed for the “most closed” public company ever, with dual-class shares and nearly unassailable control for Elon Musk.
• “There is, there is no hope to have any access.” — Damian (36:59)
• Discusses regulatory changes post-WeWork: now major investors get pre-public “looks” at filings, entrenching structural inequality between large and retail investors.

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6. Shareholder Proposals: Old Faces, New Tricks, and Anti-ESG Tactics

Reduced Submissions, Changing Tactics (46:29–55:44)

• Proposals dropped from ~950 to ~790 year-on-year, with only 7–8% winning majority support (50:00).
• Two groups dominated: long-time individuals (John Chevedden, Jim McRitchie) and “anti-ESG/hate” groups that learned to mimic classic governance proposals to drive their own fundraising.
• “What you really saw was a complete drop off of ENS issues, environmental and social…as you so basically disappeared.” — Damian (50:27)
• Anti-ESG groups began filing generic disclosure asks (e.g., requesting Scope 1 & 2 GHG emission data) to increase their support rates for donor reporting.
  • “They magically became old fashioned ESG analysts.” — Damian (51:23)
  • “Their average vote for has increased year over year.” — Matt Moscardi (53:29)

Rise of AI and Ethical Governance Topics (57:40–58:45)

• AI-related proposals (algorithms, data privacy, ethical use) are an emerging, cross-partisan concern.

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7. Executive Pay and Proxy Advisors: Little Pushback, Shrinking Influence

Say-on-Pay Votes Waning (59:00–62:10)

• Fewer revolts: only 44 of 1,100 companies had <70% support, further evidence that Say-on-Pay is increasingly symbolic.
• “My problem with say-on-pay is it’s …a way of kind of diagnosing shareholder sentiment but it doesn’t really have any…real concrete impact.” — Mike Levin (59:37)
• Disconnect: Directors who set pay rarely, if ever, lose elections.

Proxy Advisors Under Pressure (63:34–66:02)

• Institutional investors are moving away from defaulting to ISS and Glass Lewis, relying on in-house (often AI-enhanced) voting models.
• The “ISS penalty” (the effect of their recommendations) is shrinking rapidly.
• “Why are we paying two people to tell us [to vote with management]?” — Matt (64:46)
• Glass Lewis moving to “non-recommendation” analytics only.

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8. Speed Round: What Actually Mattered This Year?

(69:01–79:20)

• SEC 'No Action' on Proposals: Not quite impactful yet but expected to matter greatly going forward.
  • “It has not mattered quite yet, but it will matter.” — Matt (70:05)
• “Dexit”—Delaware Exodus: Minimal company migration, but Delaware’s legal posture has shifted in response.
• Anti-ESG Movement: Symbolically and practically shifted the conversation, as policies, sponsors, and votes all move away from ESG.
• Musk’s Pay Package: Precedent effect more than immediate impact; triggered more copycat proposals and loose executive compensation practices.
• Exempt Solicitations: Still largely irrelevant, though Ann cites a new paper showing they can move the needle with institutional investors.
• Director Attendance: Still the main reason directors lose (or almost lose) their seats; no correlation between corporate performance and director votes.

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Memorable Moments & Quotes

• “If you shut up for the next 18 months, we’re going to give you everything you want.” — (06:13) On Lululemon’s settlement with Chip Wilson.
• “The shareholder vote is a sort of a singular action that combines a whole lot of sentiments about what’s going on at a company.” — Mike Levin (66:43)
• "My favorite...is that the problem with precatory proposals isn't the proposals. The precatory part is that...it's a community that doesn't push its agenda as hard as it could." — Mike Levin (72:30)
• "I don't know if there's an easy way to answer this. What happened between the failed WeWork IPO...and here?" — Damian (43:08), on regulatory changes enabling the SpaceX IPO.
• “AI China. AI. AI. AI China.” — Matt Moscardi (79:09), jokingly summarizing the next year’s issues.

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Notable Timestamps

• Proxy Contest Trends & Founder Activism: 03:09–16:30
• SEC Regulatory Changes: 17:44–27:49
• Reflections on Shareholder Apathy: 27:57–35:28
• SpaceX IPO & Governance: 36:00–45:14
• Shareholder Proposal Breakdown: 46:29–55:44
• Say-on-Pay and Director Elections: 59:00–63:32
• Proxy Advisors and ISS Penalty: 63:34–68:59
• Speed Round Recap: 69:01–79:20

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Tone & Style

The conversation is dense with data and insight, irreverent in places, and always skeptical of received wisdom—especially concerning corporate governance “best practices.” The speakers engage in lively debate, openly disagree, and use humor to highlight the underlying absurdities and paradoxes of modern shareholder democracy.

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For Listeners New to Proxy Season:

• 2026’s cycle has seen a retreat from transparency and less public drama, but behind the scenes, activists continue to battle and settle.
• The world of US shareholder activism is “quieter”—but also more tightly controlled, more cynical, and subject to new deregulatory winds, even as headlines scream about record CEO pay and meme-stock IPOs.
• Mechanisms meant for democratic oversight—director elections, shareholder proposals, advisory votes—are at their weakest point in years, challenged by both regulatory policy and a disengaged investor community.

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A must-listen for anyone interested in the crossroads of corporate law, activist investing, institutional behavior, and the evolving nature of capital market “democracy.”

Transcript

[A]

Welcome to a Free Float media crossover.

[B]

Yeah, that's Mike Levin. You just heard an activist investor who lives and works in Chicago.

[C]

And that's Damian Rollis who's really enthusiastic about Mike Levin living and working in Chicago. Damian Rollis, a co founder of Free Throat analytics, coming to us from Portland, Maine.

[D]

And that was Ann Lipton, a law professor. And I think we should shout everyone's names at the University of Colorado who researches and teaches securities and business law. I, I, before you say anymore, I edit this show every single week and it's really a joy to say the thing that I have to edit rather than just editing.

[A]

Oh, just now. All right. Hey, Matt Mascardi. That was Matt Mascardi. He's the other co founder of Free Photo Analytics. He's coming at us from Connecticut. Of course, followers and listeners here know that Ann and I bring you Shareholder Primacy, which is our podcast about activist investing, securities law and all the ways the financial legal roles intersect and collide in real life.

[B]

And this is also Proxy Countdown with our big crossover show for the week of July 6, 2026 with my tag team partner, Matt Moscardi.

[D]

Yeah.

[B]

So on, on today's show, we kind of, we did this back in December. Let's do it again. We're gonna look, we're gonna look back at everything that's been happening since December. Is that a fair summation of what we're doing?

[A]

That's right.

[B]

A wrap up of a proxy season that Mike, I know you don't, you don't love the term proxy season, but we're gonna wrap up something, right?

[D]

We're gonna wrap up the last set of voting that roughly ended up to now.

[A]

Yes, yes, correct. So, and let's, so we'll send our followers here, both our Proxy Countdown and Shareholder Primacy followers here, off with some worthy provocative ideas to ponder as vacations get underway. As a reminder, if you have questions, you can find Ann and me, Mike, at shareholder primacy. One word. At@sign freefloat llc. And of course Damian and Matt. If you have questions and comments for them about Proxy Countdown, you can find them at Damien D A M I O N at Sign freefloat LLC with those questions as well. So as we hinted here, we were looking at overall results from the meetings from the annual AGMs, annual general meetings borrowed from the continent in 2026. We want to know how did companies and shareholders do relative to each other in AGM votes. We'll look kind of differently at shareholder proposals and then also a little bit at Proxy contests. Let me begin with the proxy contest stuff, if I may. Colleagues. Can I do that? Yes.

[D]

Yeah.

[A]

There were many fewer proxy contests that went to, like, a voting outcome.

[B]

My, my data says there was one. Is that possible?

[A]

Only one? Well, maybe.

[B]

Well, according to what I looked at, there was one traditional proxy contest that went to full public vote. And that's at a.

[A]

There were, there were a few that were. Well, but I mean, but there were. I mean, the one. The other ones were like really small cap companies, really tiny ones. I was involved in one that went to a vote, but that was way back in October where I ended up on a board as a result of a shareholder vote.

[B]

Are you still on that board?

[A]

I am.

[B]

We won't. I'll erase that company from my.

[A]

That's, that's a different. That's a totally different story. That's the one that we joined the board and put into bankruptcy two months later.

[B]

Oh, so.

[A]

So I've been working, working on a chapter 11. So that's.

[B]

We should invite him to our board and see how that goes.

[D]

No, that's the worst idea you've ever had.

[A]

Anyway, so there have been a lot fewer contests that go to a vote this year. And normally, you know, for all the attention that proxy contests kind of get, between the proxy advisor recommendations and all the competing news releases and the fight letters and all the advisors and all that kind of stuff, there's, you know, usually you could count the number of proxy contests that go to a vote in the US like on two hand. On one hand, almost two hands. And there were even fewer this year. There were probably 12 or 13. So far this year there've been only eight or nine. Again, a lot of them were tiny. Activists prevailed at roughly the same rate as last year, maybe a little lower. Out of 10 that I looked at, there were only three where the activists won anything. And the other, other than the one I was involved in, where we won a majority of the board. The other two were like one seaters. So activists, you know, just based on those kind of results looked like they had a bad year. But on the other hand, there were lots of settlements. A lot of stuff was going on in the background. We'll talk about this a little bit later too.

[B]

I was going to say that this was probably an intentional strategy, right? To.

[A]

Oh yeah.

[B]

To avoid the, the public filings.

[A]

This is not an accident.

[B]

Right.

[A]

There was. You know, when you settle, if you're an activist, when you settle, you generally get all your expenses paid. You get most of what you're looking for. If you're the company, when you settle, you get. You avoid a lot of adverse publicity. And publicity was getting more adverse.

[B]

Yeah.

[A]

This year.

[B]

Well.

[A]

As activists made things more personal. Go ahead.

[B]

In fact, Matt, this kind of answers the question of. Of the craziness at Lululemon where it got so adversarial that Lululemon ended up essentially saying. What's his name? Chip Wilson.

[D]

Chip Wilson, founder.

[B]

Basically. They were like, if you shut up for the next 18 months, we're gonna give you everything you want.

[A]

Yes, that's.

[B]

So that. So that works to me, that's a summary of this proxy season.

[D]

Yeah, well, I mean, what kind of settlement is that? Like shut up and we'll give you anything you want.

[B]

Like, to Mike's point, I think they just, you know, I. I don't know. I think there's a strategy.

[A]

They'll stop criticizing management. Wilson was.

[B]

Don't put critic.

[A]

He was the founder. Wait. Yeah.

[D]

So wait, can I push back on credible critic given the fact that that guy helped destroy shareholder value, got ousted from his own company.

[A]

Credible if you're a voting shareholder.

[D]

But I mean, voting shareholders seem to have no memory. Right. Like one of the questions.

[A]

Absolutely right.

[D]

So what makes it really credible? I mean, like, do we. We don't remember that it was literally just like nine years ago.

[A]

That compared to some schmo like me who's some outsider who just owns a few shares. A guy like Wilson, a founder, whatever, tends to his critique sometimes carries a little more weight.

[B]

Oh yeah, for sure.

[A]

With shareholders. Compared to, you know, a portfolio manage. I like that. That. That way.

[B]

But yeah, yeah. Matt, it takes actual due diligence to. To. To do what you're suggesting, which is to. To look at his failures and the controversies and.

[D]

But I think heaven forbid we do that.

[B]

To Mike's point, he was the founder and that's it. That's a. That's all we need to know.

[D]

Well, he had 8%. 7 or 8% of the shares, right?

[A]

Yeah, no, he. Right here. Anyway, so. So let's look at some of. Some of these. So again, there were almost no notable proxy contests that like went to a vote this year. You're nothing like, you know, two years ago. We love talking about trying at Disney and Norfolk Southern with Ankara. There were all these huge, big, delicious. There's nothing like that. This year there was. You guys know who Big Larry holdings is? Sardar Big Larry.

[B]

Yeah.

[D]

Self styled Warren Buffett.

[B]

Yeah. Yeah.

[A]

That's what he called Big Larry holdings or Berkshire Hathaway. Trying to confuse you. He lost two, Cracker Barrel and Jack in the Box. These were not proxy contests literally where he was able to elect directors because Crackel Barrel in particular had modified their bylaws. And you and I talked about this where they, they totally created bylaws that precluded him from running director candidates. So instead he did withholds and he lost badly. But then there were some other stuff. So in, in lieu of some of the vote for director kind of proxy contests, there's a increase in these lot more interesting ones. So there was like a lot of M and A activism. There were two mergers that terminated as a result of shareholder solicitation. Core Core, we've couldn't merge with, I'm forgetting the name with Core Scientific. And an activist called Two Cs was able to.

[B]

Is this unusual?

[A]

It doesn't always happen. No. Okay. And Star Surgical was lost. Lost a vote to approve a merger because of some friends of mine at Broadridge at. An activist I know called Broadwood in New York. So there were two mergers that had. It couldn't go forward because of activism. And then there. But interestingly some other non board election stuff like withhold campaigns, it didn't seem to work really well. Big Larry lost both their withholds. There was a prominent withhold campaign at Victoria's Secret, that one started as a proxy contest. The activists, which was a not very well known activist called brrc, they started a proxy contest, withdrew the candidates, tried to vote no and then lost that one.

[B]

So, so what are.

[A]

Go ahead. Sorry.

[B]

I was going to say. So what do we, what do we think here? Is this the, is this the sort of immediate effects of several years of an anti ESG vibe which is suggesting.

[D]

Which is neutering of ISS in Glass Lewis.

[B]

Well, neutering of everyone. How about. Which is the companies and management know best and everyone else is just shut up.

[A]

I think I have a slightly different view about why we're not seeing the normal kind of vote for director proxy content. First, universal proxy led people to settle a lot more. Second, companies have through other means like through aggressive use of advanced notice bylaws prevented or at least dissuaded activists from trying to run these traditional proxy councils. They're doing other stuff. They're trying to oppose mergers, they're doing vote nos, they're trying to maybe do bylaw amendments, things like that. So there's stuff outside the traditional or what we saw was the traditional proxy contest director election stuff. So anyway, so. So in that context there were A lot of settlements. As I started talking about, we started talking about Chip Wilson settling at Lululemon. I don't know if you folks saw, you know, a traditional, very good activist named Impact of Capital Lauren Taylor Wolf, she got, she did a really unbelievable job to get like three or four directors at a company called Wex. We access the ticker.

[B]

Wex is right here in my hometown.

[A]

Yeah, exactly.

[B]

Wait, wait, you said she.

[A]

I don't see Lauren Taylor Wolf. Yeah, she's.

[B]

I don't think we've ever covered. This is the first her up first activist investor woman I've heard of. Okay.

[A]

Everyone forgets that Starboard Value Jeff Smith did start at a project at TripAdvisor which was a longtime activist target and was able to get a good settlement out of them. Starboard also got a good settlement at CarMax, got a couple directors elected and then lest we forget, there was the two gun makers going after each other.

[C]

Oh God.

[A]

That was Sturm Ruger. Great. How Ann, what was that about?

[C]

No, it was great because I think one of them, I forget which one had like a camo colored proxy card,

[B]

of course tells you two things.

[C]

One, this is not a pitch to institutions and two, this is a great thing for class demonstrative.

[A]

Yes. Right. So that's Beretta. Beretta and Sturm Ruger. Beretta was going after Sturm Ruger and I think Sturm Ruger is the company had the camera color proxy. So there are all these really interesting. So a lot of the big ones that we normally would have sort of celebrated as going to a vote and sort of looked at those carefully. Just they all settle anyway. There's, there's others to go. This is one of the points I wanted to make is that proxy season is not quite a season anymore. There's like five or six proxy contests still to be prosecuted between now and September. So a third or a half as many as we've already seen have yet to have shareholder meetings. Then we'll start over again with you know, some annual meetings later in the we later in the calendar year. So one of the the biggies that we started to follow but there was some news about that over the weekend was have you guys followed this company called Fermi? Frmi is the ticker.

[C]

And I'm aware they're having a fight in Texas.

[A]

Right. So it's it that'd be interesting to be a Texas domicile. They're like an AI power campus.

[B]

Oh, right.

[D]

Yeah, that's why I know them.

[B]

Yeah.

[A]

Right. And so Toby Nougabar. This was fascinating. Toby Newberg was the founder. He was. Was buddies with the former governor there, Rick Perry. And they started this company to do a power campus for AI data center. They got some really great land outside, I think Laredo, I can't remember where. He called a special meeting. A company went public in a SPAC like a year and a half ago. He then called a special meeting while he was CEO, this is like in April to elect new directors because he sensed that the current board was starting to oppose him. And then they fired him and then they canceled the special meeting. And then he, because he owns 40% of the shares, he started soliciting to run a special meeting for the end of June or sometime in July that be would have been this month. So he started soliciting for that, spending a ton of money on solicitors and so forth. And then just over the weekend, he called off. He suspended his demand for a special shareholder meeting to elect new directors that would be friendly to him. And it's either because they've looked like they're making progress and they're going to find the right tenant for this AI data center campus, or the other view of this is maybe he was starting to lose and he wasn't wasn't going to get this special meeting was looking for. So that was one of the ones we were kind of tracking.

[B]

This sounds a bit like Chip Wilson. He was accused in a filing of threatening, abusive and bullying behavior.

[D]

Yeah, honestly, actually, when looking at the activist campaigns this year, it feels like more of them were driven by ex founders, fired founders or founders themselves than in past years. And even Big Laurie, he's been attacking cracker barrel for 20 years.

[A]

This is white whale, man. He hasn't been able to get that for. Right.

[D]

It's like not, It's. That's not even new. What I actually feel like this would be the year that activism is most important, given the fact that the SEC has neutered everything other shareholders can do to hold a company accountable between no action and exempt solicitation. And not to say the shareholder proposals were that impactful anyway, but at least it was a conversation piece and there was some sort of media component to it. But now there's none of that really at all as that's as effective. And the activists disappeared simultaneously.

[B]

Well, they didn't disappear. They didn't disappear. Negotiated everyone, everyone out of sight of

[A]

public fire and did rear guard actions to get what we needed in terms of changing companies to try to improve their, their business prospects.

[B]

It's a loss for disclosure, but I don't know if it's a loss for the activists.

[D]

I think, I think we need to push Mike to like do some massive try in, like attack on, you know,

[A]

like just cost a lot of money and take a lot of time. I'd rather. But we could. I'll think about it.

[D]

We'll just give you the data. That's. We'll just give you data. That's half the money.

[A]

That's half the money. All right. So that's kind of what was happening with, you know, the high marquee, high, high visibility proxy stuff. I thought we maybe we should take a minute or a little bit of time and talk about what was happening. Regular, legally regulatory, because there was some, I don't know how loud or quiet things were first half of the year, but there were some things happening like at the SEC or at the states. So, so what did, what did that look like? I was going to say what did that look like somebody, but I know who this.

[B]

How dare you.

[C]

Yeah, the big story at the SEC level, it actually began last year when the SEC announced it would no longer adjudicate whether shareholder proposals comply with the federal rules. So it used to be like if a shareholder submitted a proposal and the company wanted to exclude it, saying it didn't comply with the rules, they'd tell the SEC and the SEC would kind of give a thumbs up or thumbs down. And if the SEC said it was okay, it would be included. And if they said it wasn't okay, it would be excluded. And that usually was pretty much where things landed. But last year the SEC announced it's not going to decide these things anymore. So companies kind of have to decide are they going to exclude the proposal or not? And they'll. And if the company thinks it doesn't comply with the rules, they'll leave it off. And at that point, the shareholders only option is to just bring a lawsuit. They have to actually sue and say actually the company's wrong and we're entitled, but you have to have resources to do that and a lot of shareholders don't have the resources to do that. So the big change this proxy season is companies were basically given a free hand by the SEC to exclude shareholder proposals. And there's a study out now by a researcher at Harvard, Anna Toniolo, if I'm pronouncing her name correctly, and she found that at least some companies were really kind of taking advantage of this and excluding proposals that they really shouldn't have. Kind of betting that the Shareholder wasn't going to sue, which was very likely. So the SEC now has been sued over this change in policy, the Interfaith center on Corporate Responsibility. And as you so have both sued the SEC saying that they can't just willy nilly stop enforcing the rules on shareholder proposals anymore. But nothing's happened on that yet. I mean that lawsuit's just getting started. But beyond that, this year, what we haven't seen, we haven't seen new regulations, but we've seen proposed rules. And if these go through, they're going to be a really big deal. So the first one, the SEC is proposing to make quarterly reporting optional so the companies can choose whether they'll report quarterly or semiannually. And we are recording this on July 6th. Today is actually the deadline for public comments. Oh, it is, it is. Unless they.

[A]

We gotta get on that, guys. Did you comment yet?

[C]

Get your comment?

[D]

Yeah, but actually I just wrote no.

[B]

Yeah, well, I'm indifferent on this one.

[C]

Are you really? Why?

[B]

I don't know. I, you know, I like all disclosure, of course, but I, I always, when I started in this field, I thought that the, the extreme attention on the short term was a negative thing and to, and to force companies to focus on short termism was bad for the, for, for shareholders, bad for the stakeholders. And I don't know, I wonder, I'm not saying that the effects of this is somehow going to suddenly benefit long term shareholders and stakeholders, but I do think one of the reasons why CEOs for example, have gotten so rich is they've been able to kind of game the short termism for, of their environment and, and kind of mess with this, you know, like this, this mess with share prices. And I don't know, I, that's why I don't really know where I land on this one.

[C]

But, but yeah, well, that's definitely the SEC's position like that, that part of the reason they think that this is an improvement is because it will make things less short term. And the argument, you know, that you're seeing most, I'll say most of the public comments, the vast majority are coming in against and they disagree.

[B]

I understand that.

[C]

And they, and one of the arguments is that it's not the quarterly reporting that inspires short termism, it's projections that inspire short termism. And that's what you can change. So, but the thing about comments, legally it's not a vote, like it doesn't matter that the overwhelming majority of comments are against. The SEC is required to take into account like new Facts and arguments and so forth and take those seriously, but it doesn't. It's not required to take a tally. So the mere fact that all of these votes, most of the comments are against that part isn't really what matters. What matters is whether they give new information that the SEC takes to account. So that's unless they extend the deadline, which by the way, two people on opposite sides of the groups on opposite side of the aisle are asking for deadline extensions because there's a lot more that's also in the pipeline because what's flown more under the radar, and this one, the deadline for comments, is later this month. There's a massive proposal to completely overhaul what companies have to report. So under the current SEC system, bigger companies are subject to more disclosure requirements and smaller companies disclose less. And bigger is based on the size of your public float. And the SEC wants to overhaul the thresholds so that more companies are considered smaller and have fewer reporting obligations. So right now, if you have a float of over 700 million, that is the threshold for big. And that anyone with a float of over 700 million, they're subject to the full set of reporting requirements. The SEC wants to raise that to 2 billion. And statistically that would mean that right now one third of reporting companies are over the threshold. If we move it up to 2 billion, then fewer than 20% would be in that largest category.

[B]

This was our original set of kind of wild predictions. I don't know if it was last year or two years ago that we're basically, we're entering a drawdown of disclosure, right. We're like, we're going to, we're going to taper away into nothingness. And that's what scares me most actually about getting rid of the quarterly reporting is that it's a slippery slope at this point. So it sets a precedent, which makes me uncomfortable. But I think that, I think this unfortunately is the future of this area is just chip away at it.

[C]

Yeah, exactly. When you take this, this into account, I mean like some of the comments, I mean like the issue here is that not just the changes, and I'll talk a little bit more, just briefly about what those are, but also the fact that they're massive changes and they're all being piled up at the exact same time. One, I don't think this now three member SEC commission supposed to be five is seriously, like seriously considering all of the evidence. And the fact is that these are gonna have interaction effects. And because it's like change everything and change everything. Now that is the part that scares me the most. So this is what's gonna happen if this goes through. All these companies that are no longer considered large, they no longer have shareholder votes on say on pay. They no longer have to have auditor attestations about internal controls. They only have to report on executive comp for the top three officers rather than the top five. They're exempt from a lot of the compensation disclosures and they could get rid of risk factor disclosures in their cases.

[D]

Oh wow.

[A]

No kidding. Well, I don't really read those anyway. I probably should.

[C]

Well, they can subtly change. So one of the comment letters is about how often they very subtly change. This is the kind of thing that I assume hedge funds are using computers to read they very subtly change. And that's really telegraph something that's going to come down the pike. So the justification for all of this obviously from the SEC's perspective is oh no, we have all these reporting burdens and they're so costly and companies want go public if we don't have these requirements. But there are comments of course that are arguing the SEC is ignoring all the benefits. So this one is my favorite. The SEC have proposed these changes and it cites this academic study about how much companies have to pay for the auditor attestation about effectiveness of internal controls. And the SEC goes through. Look, this academic study found these costs. It costs companies so much money to get the auditor attestation. So we should have fewer companies do it. Well, the authors of that study, the academics who wrote it, submitted a comment and said that their work was being mischaracterized because yes, they did identify these costs, but they also concluded that the benefits were two or three times larger than the costs. And the SEC just left that out.

[A]

And the point, they didn't read the whole paper.

[C]

They just, they only read the parts they wanted to read. And the point the academics made was that it's really the smaller companies that need the attestation because they're the ones who don't have as professionalized as a system. This doesn't matter as much for the big companies. So you're doing the opposite of what you should be doing when you say the smaller companies don't have to do it.

[B]

But not only that, but what this, this, this burden, this terminology that they always use, it's a burden. How? That's never a proven thing. Right. It's just the, they're just playing around

[A]

companies just estimating their costs and so.

[C]

Right.

[D]

But they just, when they estimate their costs, they don't do it, relative to something. Right. Like they just say, like they, like they would say shareholder proposals cost, like are overly burdensome to pay for. But relative to CEO pay, you're talking about a relative to everything. Yeah, I mean what are we talking about? Like their costs aren't actually real. It's all just cloud cover. Right. So, so really the, the question is the SEC is very clearly tipping the scale towards corporate power and away from investor power. Right. And the states are, are actually, they're doing the exact same thing. It's the race to the bottom for like, you know, what can we deregulate for investor rights and not corporate rights. But where does it, at what point does it end? At what point does the market become. It's already, according to our own data, it's already more than 20% totalitarian companies. Those are companies with like dual class shares, classified boards plus you know, like some sort of control structure, a founder on the board with a large stake. These are companies where there's no challenge, no real accountability from investors to begin with. At what point, you know, when we hit like 50%, is it just a private market? Like at what point have we gone past the pale?

[C]

You know and I keep saying like, I mean others are less concerned about it, but I think for me part of the concern is there's so much indexing and shadow indexing and things like that that like all the mechanisms, all the market mechanisms are seem to be, you know, atrophying like that there's just, you can't vote and there's, there's less information to base a sale on. You can't sell easily if you're indexed, you can't sue because the states are eroding those rights as well.

[A]

So move you to Texas.

[B]

Yeah, of course. So can I play wise ass here for a second?

[D]

Oh yes.

[B]

Now the, the, the opposite end of the Matt, we talk about this all the time and I know it especially frustrates you. So according to the data that I've scraped together, we only have nine say on pay packages that have failed outright so far and there's basically very, very little action against pay at all. So I actually had posed a question that I was going to ask later in the show. Why should anyone care anymore, why should we care about C anymore if the market's already basically eradicated it? And I'm not saying that I support getting rid of it, but I feel like the market's already, the investors class is already ignoring it so.

[D]

Well, that same argument applied to proxy access and the ability to nominate your own shareholder. Which has really only used by a few activist investors but was fought for by pension funds and you know, asset managers over years, years and years and years getting proxy access. I remember doing a report at MSCI back in the day with Rick Marshall and talking about proxy access as a, as sort of a beta activism. Like the market is all pushing for the same, you know, governance request at many, many companies across the S&P 500 in order to create a sit. Investors have that right and then investors got the right and summarily ignored it.

[A]

And

[C]

I'm going to. I'm not sure that's exactly true because I think that universal proxy made proxy access less important. So like if you.

[A]

Instead of that we got to universal.

[C]

Yeah, like before a proxy like so for example, I'm not sure it would have made a big difference for a lot of activists. But like the Starbucks ESG proxy contest, that might have been a proxy access thing if there wasn't a universal proxy system.

[A]

Oh sure, yeah.

[D]

But even then we don't see. We, we have yet to see a non activist investor submit a director for election. We've yet to see a failed say on pay vote where they still didn't find a way to pay the CEO the same exact amount. We've yet to even see a director. In fact this year in 2026 multiple directors got voted out. Only one or two actually left. Like that.

[A]

Not that actually not the zombie director problem.

[B]

Right.

[D]

The zombie director problem is as large as it's ever been. And the ones that left were the cracker barrel political one and Brian Hemphill who was like the first one voted out this this season and they only get voted out for attendance. Like there's no other vote to share price. Our literal bare minimum expectation is go to a meeting. If not then we'll vote against you. And even if we vote against you, it doesn't really matter because you're probably not going to leave anyway because like, like they literally write Damian pulls this in the proxy countdown all the time. They literally Write in the 8K. We think it's in the best interest of shareholders if this director sticks around days after shareholders voted out that director. Like so I'm not sure that even having. And this is, this is piling on the wise assness like I'm pro shareholder rights and I'm not sure I understand exactly why we have them because the investors themselves haven't been using them.

[B]

Okay, theoretically, I get it.

[A]

Yeah, you're getting to my favorite subject which Ann and I have talked about endlessly, which is everything, Matt. Everything is rational apathy.

[D]

I. I don't know that it's. Right. Like. So rational apathy is the argument that the cost of doing it effectively outweighs the benefit and.

[A]

Or your own portfolio. Yeah.

[D]

To your own portfolio. Right. Like so your own individual benefit from doing this action is outweighed by not doing it and just sort of letting the market decide. But we have example after example after example in not capital markets, but in every other market. Like, if you look at sports as a market, these. If you, if, if, like, teams had rational apathy, then what would happen would be the players would choose their friends. They would. The teams wouldn't necessarily win. They'd all get paid more and only the players win. That seems to be what's happening in the real markets. I know I'm getting off topic, but I. The idea of rational apathy to me is like an excuse for not doing something. When all the academic research suggests that doing something actually has value, it just. Nobody wants to do it themselves.

[A]

And that's still. That's. That's the heart of the. That's the heart of the.

[B]

But still no one's answering my question. What if in our democratically held elections, you know, for political offices, what if in, in every election, in the average election, one candidate got 95% support and the other candidate got 5% support? Would we care anymore? I mean, would anyone? That's what's happening with directors. They get 95% of support. So I just, I understand theoretically why it matters, and I, I fight for that, but I don't. I guess I'm just sort of. Maybe I'm chasing hope because. Because what. What is the meaning of this vote? Any what. What are the meanings of these votes?

[C]

Right.

[A]

I think, I think, okay, you know, out of three to 4,000 votes a year, you know, there's going to be that small handful. It's just, it's shrank in the past few years, but there's going to be a small number where there's a lot at stake for the shareholders and so forth. And so they. All the factors kind of converge to make those votes relevant and valuable. That's kind of my immediate reaction to why people continue to even vote, because occasionally there's an optionality. You'll need the right and the opportunity to vote at some later point, so you want to kind of preserve it. Maybe that's.

[D]

Maybe that's. And let me ask you a question. How much of all the changes changed the way you Teach. Have you had to, like, tell the students, like, by the way, you're learning a whole lot of stuff that A, is likely to change and B, half the people don't care about anyway.

[C]

Yeah, well, I mean, I mean, once again, like, we haven't. Like, there's state law and there's federal, and I actually teach, I have a secrecy class where I teach the secrecy changes and those dramatic changes, it's, it's, it's a nightmare. I'm also on a casebook and we have to rewrite the casebook every year. So those actually change. That changes the lesson plan quite a bit. And I actually tell the students on day one, the securities laws are always changing. You're responsible for whatever the law happens to be on the last day of class. So I have definitely had situations where I handed out new rules and new statutes mid semester, like, whoops, it changed. Let's go back over it. But when I teach state law, like state corporate law, the story was mostly Delaware, and I pretty much was just teaching Delaware now. This year, for the, for the first time, I actually gave them Texas and Model Business Corporation act, and we really went through. So that students could compare Delaware, Texas Model Business Corporation act, and they could get a sense of how those differ.

[A]

But not Nevada in the curriculum yet.

[C]

No, because, well, Texas and Nevada are similar in many ways and there's only so much time. So that's why I chose Texas.

[A]

All right, cool. Hey, there is one other thing that happened that's. And then we have a lot to talk about related to shareholder proposals and so forth. There's some really interesting stuff going on there. But there was one other item I wanted to bring up before a break, and I'm almost reluctant to do it because Ann and I hate talking about it, which is, can you guess?

[C]

Elon?

[D]

Musk.

[A]

SpaceX.

[D]

It had to be Musk.

[A]

So there was, of course, with lots of juicy and potentially repellent attributes to it, an IPO. You know, the IPO market looks like it's thawed, has it not? And SpaceX went public, and that was about four weeks ago. Five weeks ago. Four weeks ago now. So I was going to say that. I know. I didn't, I didn't put it, I didn't put it in an order for shares. The only way I'm going to become an owner of SpaceX is when they convert my Tesla share when they acquire Tesla, which that was. That was a landmark ipo. Would we. I mean, for bad and good reasons, but probably more bad.

[B]

What are the Good reasons.

[D]

Yeah.

[A]

Okay. More bad.

[B]

No, I mean, do you know, I'm willing.

[A]

No, there's no, there's no, there's no reason. There's, there's nothing good about this ipo.

[B]

I think on our show, I called it.

[A]

Yeah, go ahead.

[B]

I was gonna say, I think I called it the beginning of the end because it, because really, really. Well, because really, this is like an, the, the, the, the, the general population, the market investors. We have, we have finally accepted the, the, the most closed public company in the history of the like. There is, there is no hope to have any access. Well, but this one is truly like

[A]

a lot of jumping up and down with when Facebook went public and I. And, and yes, control structure.

[B]

And of course we talk about that all the time too. But, but, but this is really like, but we, we as a culture and a society, you know, we used to kind of learn our lessons from, from worst practices and best practices. And we've had 20 years of complaining about Mark Zuckerberg and the ill effects of Facebook. We've looked at the corporate structure and, and you know, we rip our hair out about it. So here we now have this other behemoth coming from this other, you know, egomaniac. And yet we do. We do nothing to change anything. Like, there's no, there are no sunset clauses. There's nothing. It's just a complete.

[A]

Because it's, it's up in my. And I, we, again, we've talked about it, but I would welcome. Your comment on this is that in some respects, the SpaceX IPO was giving shareholders kind of what they want, which is some sort of hot ipo or they can compete over it. You know, there's, there's a sociology.

[B]

Right.

[A]

It's a meme stock. Exactly.

[B]

Yeah. You know, Facebook, they can already bet on football.

[A]

Yeah, right.

[B]

Well, it is.

[A]

So, so that, that's, you know, that, that also happened with some, you know, the ownership structure is, is Right.

[C]

I mean, I mean, to be fair, like, you know, some of the limits on securities, federal securities actions, those have yet to be tested and it'll be some time before they are because, I mean, let's assume he does not commit securities fraud on day one. So at some, it's going to take some time and that's kind of like.

[B]

Well, I don't know.

[C]

It's going to be. I've already criticized the legal analysis in their registration statement. Statement. But you know, it's going to be some time before there is some kind of reason to bring a securities fraud action and at that point if another company doesn't do it first, you know, all of these restrictions on securities class actions, those are going to be tested and we don't quite know yet how those will play out. So we don't know if it's as locked up quite as tightly as they've tried to do.

[B]

The worst thing to me too was that was it only standard and poor, the only the S and P didn't bow down and change all the. Yeah, that, that was the most disheartening part of this too is that we had established, you know, criteria. Forget, you know, forget the criteria, forget it all. Just let's just fast track this in.

[C]

I mean one of the things is how much that broke through in terms of public reporting. I mean they get it wrong but like, but Jimmy, how did they get it wrong? Like, oh, like they just didn't quite describe how the indexing works. But like Jimmy Kimmel made a joke about it like oh my God, Jimmy Kimmel made a joke about how going

[A]

into the index, I beg your SP

[C]

but SpaceX was going to be in everyone's 401k whether they liked it or. And I'm seeing like headlines of like it's entering this index. How much are you exposed? I couldn't help it. I sent an email to Vanguard, it's please don't put it in the index. And they sent me back some kind of form letter but it was clear they were getting complaints. And so that idea that the rules changed for Musk personally and the sense that it wasn't entirely based on like a meritorious reexamination of the rules, but specifically, specifically for Musk that broke through in public reporting in a way that I haven't seen before.

[B]

Yeah.

[D]

I still think though investors have abdicated their responsibility. I mean like they, that like the, the, the lineup of Wall street banks to get this, to eat the fees to get this to market, including the contingency that they buy Grok as part

[A]

of, you know, subscribe, spend 5 or $10 million on a GRO.

[D]

I mean that was like a thing and like, and, and when you break down the business and this like Michael Berry did this, it was, this was everywhere, right? Like everyone broke down the business and said all you're really buying is hughes net from 1997 which is like satellite Internet just done well and everything else fails, right? Like everything else loses money.

[A]

It's like a, it's a really good satellite communication business. It's a break even or slightly better thanks to the grace of NASA space business and a dumpster fire of an AI business.

[D]

Right. Like so much so that that they, they bought a company, announced their intention to buy a company before going public, but couldn't announce the purchase of the company. And the minute they went public they announced the purchase of the company and there's no vote because Elon owns all the voting rights and shares and everything. And I actually, what I think it is is like investors have basically just given up and said like whatever, the market's just a meme now. But I also think it's like isn't it peak founder pettiness like you have 80% of the voting power but you also wrote in the fact that you choose 50% of the board.

[C]

I know that was 80% and they can't fire him without a vote of his shares. I mean like they locked up like the level of like it's not good enough to just have 80% of the voting power. It's also important that those his shares specifically have to vote him out as CEO or so what.

[B]

I don't know if there's an easy way to answer this. What happened between the failed WeWork IPO that everyone mocked? So something did happen so vociferously that it got drummed out of existence. He got, you know, he walked off the plank into nowhere. How did we get from there to here? I don't that well actually like leaving

[C]

aside Elon Musk and sort of faith that he's got a sort of built in retail fan base that's going to drive the price of the stock and everybody sort of has to follow that. There's actually people were asking me about that and the law changed between WeWork and SpaceX which is that when we work went public it did not have the ability to give large investors an advanced look at its registration statement. So the first time anyone saw the registration statement was at the same time the entire public saw it. But the law changed so that SpaceX could legally feel out large institutional investors and show the registration statement and show all the stuff and show the wacky structure. They were able to show that to large institutional investors before it was made public. And that meant they could really make sure that they had that locked in and they knew what those orders were going to be.

[A]

They knew what the demand was going to be be and they had a much better idea of demand for shares. Yes, right.

[D]

That seems nuts.

[A]

It was absolutely.

[D]

I mean not only is it nuts because like, you know, if you're a smaller investor, smaller institution, you didn't get access. So there's already a break point at some point like, you know, they're not giving it to Joe's Asset Management and you know, like in this is Black Duluth, but it's like they're showing it

[A]

to BlackRock, putting a $5 billion dollar share order.

[D]

So already there's a, there's a top class and a bottom class of investor. But it, in, in SpaceX this case, you had the retail component that was way bigger anyway in terms of demand, bigger than usual.

[C]

But that, but I mean, but that was part, I mean, obviously this is a lot of, you know, Keynesian beauty kind of situation that in a lot of institutions buying on the strength of what they expect with the retail demand would be. And they were right. Like I couldn't get over it. The same SpaceX page for their IPO had open a brokerage account and it had a list of where you could links to multiple retail brokerage accounts where you could open an account so you

[B]

could put it in.

[A]

That's not how this usually works.

[D]

That's nuts. All right, it's nuts.

[A]

We should probably take a little break here and then talk about a lot of the ESG proposal stuff. Everybody does that make some sense.

[D]

Let's do it.

[A]

Yes, let's do it. We'll be back here momentarily at this crossover episode between Shareholder Primacy and Proxy Countdown.

[D]

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 freeflowanalytics.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 @free flow analytics.com now back to the show.

[B]

Welcome back to the Proxy Countdown Shareholder Primacy mid year crossover. I'm Damian Rollis, back with Ann Lipton and Mike Levin from Shareholder Primacy and of course, Matt Moscardi.

[D]

Come on, why do I sound so sad?

[A]

I don't know.

[B]

All right, let's. What? Okay, let's look back at the 2026 proxy season. Let's do it.

[A]

Yes, please. So, so the one thing we didn't really talk about much in our first segment was shareholder proposals which, you know, merit a thorough review at kind of what happened. So much has changed. So what, what? And you guys have, so you guys have not. You have a lot of data on this. So I'd like.

[B]

Okay, I'm going to push back on that. We really don't. I mean, mostly because there's just the nuance of this is just not as interesting as it used to be. So, so the big takeaway I suppose is that proposal submissions fell from 951 last year to approximately 790 this year. So what most people predicted, and I think including all three of you. Yes, you, the, the, the, the, the, the, the mainstream prediction was that we would see that all companies would exclude all proposals.

[A]

Whereas I, I, I came out and said that. So.

[C]

Right.

[B]

I was skeptical about that. But, but maybe for the wrong reason. So the, the, the number is, is that about 70 of submissions went to a full vote. Yeah.

[A]

And.

[C]

Oh no, I just go continue. But I have. Yeah.

[B]

So, but the reason why they're saying that 70% of submissions went to full vote is that they were worried about litigation or some kind of investor backlash.

[A]

And there were some suits that were started over some of this, but they

[C]

went to a full vote. But they didn't all go to a full vote at the same time. Meaning what? Like as in more companies were really careful about not excluding them earlier and then later they started excluding more. It was like they were getting used to the new system. And Anna Toniello's paper, she finds it's really there was like company specific difference. Like there were some companies that were kind of like being very careful and being like I'll just let them all through. But there were others that were being very aggressive about everything's ordinary business and we're not going to let that go to a vote.

[B]

Yeah, we saw that a lot with big tech companies. You know they, they would like Facebook still meta still had like 13 proposals. Proposals. Right. Alphabet the same.

[D]

So the companies where they had dual class shares and didn't matter.

[B]

Exactly.

[C]

You think it doesn't matter. But Elon Musk now is dual class at SpaceX and he still is putting like a threshold for people to be able to.

[D]

But actually to the point of that paper. Right. Like the early data that we did earlier this year, we haven't updated it. There was actually a correlation with the law firms that were submitting.

[C]

Really?

[D]

Yeah, there's like certain law firms were much more aggressive about submissions than others and that's across company, same firm, across companies. So we would see the same names pop up now not like an empirical study like we didn't do, you know, not all 900 but we did look at you know, earlier in the season when we saw who was getting excluded and why. We saw John Chavettin was over targeted for exclusion and no actions and certain law firms Actually like overlapped with their willingness to submit requests for no action or like, you know, whatever the process is.

[B]

Yeah, interesting. All right, so. So yeah, go ahead, Mike.

[A]

We had about roughly close. Close to a thousand last year, almost 800. This year only 70% went to a vote, which is about. I. I think that's close to what we'd seen before.

[B]

Yeah, it's hot and higher than most people predicted.

[A]

Yeah. Oh, yeah. And that's the main point. Okay, so.

[B]

And then what happened from there, overall support dropped. So only about 7 to 8% of proposals actually achieved majority support. We've been reporting on this every week on Proxy Countdown. Like.

[A]

Right.

[B]

Nothing's winning. But the big takeaway I thought was that it was really dominated by to me, really two groups, mostly like the old fashioned corporate governance submitters, the John, Kevin and Jim Ritchies.

[A]

Yeah.

[B]

50% of all submissions were basically from the same two people. What you really saw was a complete drop off of. Of ENS issues, environmental and social as you, you know, places like. As you so basically disappeared.

[A]

I mean, all those folks were just right. Yeah.

[B]

And the other group that dominated was what I call the hate proposals or the anti ESG proposals. So this is from the. The groups like Boyer Research, the National Legal center for Legal.

[A]

Yeah, right. Yeah, yeah.

[B]

Now they were tricky, so they put up a big slew of hateful proposals. Usually they were mad about trans people or something, but. And those routinely got way less than 1% support, which surprises nobody. But what they also did. And I know, Matt, you hated this and I actually hate it too because I know they're jerry. Rigging the system. They magically became old fashioned ESG analysts.

[C]

Somebody explained that to me. I don't understand that.

[B]

I think it's I. And Matt, you explain because I know I kind of.

[D]

I might actually have to take some credit for it. So I talked to somebody personally, like somebody from one of those groups, one of the like executive directors. One of those groups reached out to me and we, we talked. We had like an hour long conversation. And one of the things that I said because we were. We did some arguing about like, you know, the nature of these proposals and like, you know, like it was some was combative, but some was like actually him asking me questions about, you know, the, the process and the thinking around shareholder proposals that I said. One of the things I said to him was, you know, the thing that, you know, the as you shows of the world mastered was an ask that gave investors something that wasn't an ask. It wasn't Overtly political. It wasn't, it wasn't like ad hoc ask. Like asking Disney to talk about the number of guests that were trans is something that you're only going to ask Disney about. I said investors want better disclosure in general. So if you make an ask that's like, Give me your scope 1 and 2 carbon, you can make that ask everywhere. And the more you get it, the more investors like that data, use that data, or even choose to ignore that data. But it's available to them. So your asks should actually be something that an investor can use. And what we saw happen was they flipped from. And I think it happened for two reasons. One, to make a coherent ask everywhere they focus more on governance issues, particularly independent chairs. They, they really like the idea of an independent chair. And two, I think they also realize that that coherent ask gets more support on average and allows them to go to their donors because they are all 501c3.

[B]

Absolutely.

[D]

And they get, they tell their donors, our average vote for 4 has increased year over year.

[C]

Okay, because, because some of these, like, you know, some of the. I could not figure out why like, and see, national center for Public Policy Research is asking like Scope one and two and climate disclosures like that just seemed very antithetical to their mission.

[B]

It is, absolutely is. It is.

[D]

And it's meant to drive what we fundraiser. What we do know is the shareholder proposals that were submitted by John Travetin and Jim McRitchie get an average level of support that's way higher no matter what. Because we know investors vote proponents more than proposals. The investors trust a proponent who's been doing this for a really long time. They know the asks, they generally know who they are. There, there are pseudo networks of these, you know, individuals who, you know, like show up at conferences. They roughly know each other, they trust each other, whatever. But the, they don't trust these anti esg, you know, proponents at all. They're kind of outside the zeitgeist. The exact same proposal submitted by John Chavettin will get higher support than national center for Public Policy Research, even if it's copy pasted for like independent chair or something like that. We know that like Chavetin will get more support, but they also know that the ask itself will get more support than saying company ABC hates trans people. Vote for, you know, hating trans people. That'll get less than 1%. So they can use these votes, the jury rig effectively the vote for donor purposes. And we can look at the donor filings and see it.

[C]

Oh, wow. Yeah. Because I was thinking maybe they just were trying to build up a cred so that then for other kinds of.

[A]

No, they're trying to manage. It's. They're trying to manage, you know, they have multiple constituencies and they're maybe one of their constituencies is donors. You know, that's not, that's not a whole lot different. You know, I do know that that's how it works for some of the main.

[D]

The ensg. Yes, absolutely.

[A]

Proponents is that they have a donor base.

[B]

Yeah.

[A]

And they want to see improvement.

[B]

Yeah.

[D]

They always want to see progress. So and in that progress can be either in the type of ask. You know, we're asking for more and more now. We're asking for scope three. We, you know, ask for scope one and two. Or it could be in level support. The level of support.

[A]

All right.

[C]

So just really quickly on the drop off like and just to the drop off as you. So I see those kinds of groups. You know, this gets back to I think what was said earlier about I think, you know, there's been so much regulatory hostility from the Trump administration towards ESG stuff. I think those proponents think shareholders aren't going to vote for it. Not even whether they want it or not isn't really the issue. The issue is that they know that like you know, Ken Paxton will file a civil investigative demand if they, if they vote in favor of an environmental proposal. So they're not going to vote in favor of environmental proposal. So as you so doesn't make the proposal. I think that's what's going on.

[B]

Well, let's not forget that Exxon suing its shareholders.

[C]

Well, yeah, but that was really specific. I mean that was about. On a very specific claim. And the claim was you are violating the rule that says you can't resubmit the same proposal. That's not always going to be the issue. Especially now that you can just, you

[D]

know, a lot of these, when you read the proposals year over year, a lot of them read like resubmissions.

[B]

Well, they are.

[C]

You can't. You're allowed to resubmit if you hit certain voting thresholds.

[B]

Right, right. Well, Exxon, speaking of Exxon, Exxon was, was overtly snarky this year. They added into the, in the proxy statement they, they added like asides to the titles of these proposals saying like this one that has failed, you know, 20 times in a row and really sucks. Like that's. Yes, exactly.

[D]

Like vote for proposal 5. Here's proposal 5. Shareholder proponent asks for climate proposal that has failed over and over and over. And nobody should vote for like as the type.

[A]

Make your. But make your own decision on this one.

[B]

So great, moving on. Okay, so, so the, the large majority again were sort of these old fat 50% were these old fashioned corporate governance. The only thing I would say that is new, you know, whether it's interesting or not, I don't know are sort of these AI ethical governance questions. And you know we have a. Interesting moment here for, for shareholder proponents which is that the general population on the left and right seem to both hate AI. They hate data centers. I don't know. You know, this is an area that might become, that might stick more in the future. I, I don't know. I don't know what to say about this.

[A]

Just, just to be clear, we're not talking about how AI is used like in activism or government. This is. Activists are proposals about a company's relationship to and use of AI.

[B]

Well, it could be anything. It could be, it could be data centers. It could be algorithmic transparency, it could be data privacy. But you know, this might be one of the only ones that the population agrees with. I don't, I don't.

[C]

Yeah, it's interesting because the Trump administration is obviously doesn't want to regulate at all, but the states both, you know, red and blue. There's just general groundswell of concern.

[B]

Yes. Well, it's funny you say that they don't want to regulate it but they want to take an ownership interest in it.

[C]

So I don't know, I don't know

[B]

what the difference is. Pay. We can move on quickly because I know we've been already going along on the show pay and I already hinted at this earlier, I would say nothing is happening in pay.

[A]

No, it's status quo. I mean the pay votes are worse.

[B]

So even worse. This study I looked at said that major pay revolts, which is less than 70% support shrank to 44 out of 1100 companies. So that's why I posed the question earlier. Not that I'm suggesting getting rid of these votes, but, but what does it matter? I don't know.

[A]

Yeah, I mean I again and my, my problem with Sampe is it's, it's, it's precatory. It's, it's a completely advisory yes vote. It's, it's, it's a way of kind of diagnosing shareholder sentiment but it doesn't really have any, you know, the only practical input impact has to do with CEO ego where if their votes aren't quite like some others they start to run around and talk to a bunch of shareholders and see what can we do a little better. But there's no real concrete impact.

[B]

No.

[A]

In fact, pay votes have.

[B]

We spent a long time. I don't know if you remember the name of the company, Matt. I don't. We spent a long time on our last show talking about this one particular company that got like 45% against last year. And I spent hours looking at how they tweaked the plan and then the end result was that the CEO got a raise, got even more equity, and, and they changed the language and some of the plan, but. But if you did the math, it didn't.

[C]

It just came out the same place.

[B]

Yeah. It didn't hurt him at all.

[D]

No, no, it did. It cost him $1 million in. In total summary comp from 35 million to 34.

[B]

He got more equity, but he got

[D]

like 9x the equity. So really painful.

[C]

I have a question. I mean, obviously leaving aside those kinds of games, just in terms of where shareholder voting is on this, I mean, is this just like a bull market situation? Like, I mean, in general, shareholders vote against pay when they don't like stock prices, and they vote for pay when they do like stock prices. And my question is, is like in the next market crash, will we see more rejections of pay packages?

[B]

Well, that could be. I mean, the only time I've ever noticed anything that matters in this world is at smaller cap companies. So. And it's a direct correlation to a failed share price. And when that share price is low, they vote against everything. So I don't know. I don't know why it matters. Maybe Mike would know more. I don't know why they pay attention more at a smaller cap company, but

[A]

usually there's so many different factors in the small caps. You know, I was like, I was going to say that the institutional holdings vary, but that's not always true.

[B]

Not always true, Right.

[A]

Yeah. Right. So. So, you know, part of it, they don't get quite the coverage. You know, they don't have the equity analyst followings and so forth. So there's, there's a lot of potential things that could be going on there. And I confess to not having a really clear idea about why.

[D]

Well, one thing is, is eerily consistent that no one votes against the people who set the pay that. Oh, yeah, well, never ever happens.

[A]

Right? I mean, yeah, I mean, director votes. Well, you said that at the top of the show.

[B]

Yeah.

[D]

So as long as we're consistent, we hate the pay we love the people who said it though.

[B]

And we, and we track this weekly. There is, there is absolutely zero correlation between the people who create the policy and the sound pay vote. We, we can't quite have we figured that one out, Matt. I don't, I don't understand that one.

[D]

I think people can't find the against

[B]

button for directors, but they will penalize the chairs of say, nomination committees if there aren't enough women on the board. In fact, we covered one at the conference. I already forgot the name of the conference.

[D]

No, the

[B]

CII conference.

[C]

Forgive me.

[B]

Cii, if you're listening, where they in fact even voted against the only woman on the board because she was the chair of the nomination committee that didn't have enough women on the board. So they're, they're really locked into that idea. But the only other thing I wanted to cover here. Does anyone else have anything to say about the high director support before I move on?

[A]

Disappointing, that's all.

[B]

The other thing I was looking at this year, which I, which I think is, you know, potentially interesting, is what's going on with proxy advisors. So institutional investors are starting to publicly break away from your ISS and your Glass Lewis's relying on their own kind of internal systems. And what, when I think what that really means is that they're letting AI create voting systems for them. But I think this is sort of an important moment. There's something else called this ISS penalty which is shrinking. So the ISS penalty is basically this. In 2021, ISS against recommendations on say on pay votes dragged down company support by an average of 30 percentage points. This year that penalty shrank to 20 percentage points. So my overall statement here is that the effects of your ISS and Glass Lewis's are maybe starting to go away. In fact, let's not forget Exxon creating its own, you know, retail auto vote system where. Right. So there is some kind of shifts, interesting shifts going on here. Matt, I know you want to say something.

[D]

Well, I feel like in, like investors realized that how easy it was. I mean the important number is actually the percentage of time that ISS and Glass Lewis say vote with management. Right. And I think investors in general realized it's way cheaper to just voting with management. 98 of the time is not that hard. Why are we paying two people to tell us to do that?

[C]

I, Yeah, I, I mean we could talk about like what they're using instead, but for a lot of investors this is part of, you know, I mean, they need that at least to show compliance with fiduciary obligations and so forth.

[D]

It's so I don't.

[C]

So I think you know they're, they're going to want to use some kind of advisor unless you know, they build their own kinds of tools.

[A]

Right. And that's what jp, which I think

[D]

is what they're doing. They're doing is yeah, they're building those AI tools so that they can say, you know, effectively we have our own tool in house that uses data and comes up with a recommendation they are likely to keep paying one of ISS or Glass Lewis and it's a race to the bottom to keep those accounts. Right. So ISS and Glass Lewis are forced to both say no less and cost less because they're expensive.

[C]

Well they're doing different things. So like Glass Lewis is going to move to a completely non recommendation model which you know, looks like to some extent you know, a way of getting out from under some of the regulatory pressure they're under. So their plan is to just you know, help them develop their custom policies so that they're not really making recommendations. It's just the investors, they're just applying

[A]

data and doing analytics.

[C]

But the really interesting thing though is you guys keep pointing out like these inconsistent things like I vote for the committee that recommended that set the pay even though I vote against the pay. I wonder if like a world with custom policies is one that actually gets at that more if those are sort of built in, if investors build that into their platforms, into their set of

[A]

choices because then they can mix it in with share price performance or other types of governance factors and so forth. Because part of the problem is that the shareholder vote is a sort of a singular action that combines a whole lot of sentiments about what's going on at a company. And so but the funny part, against pay but vote for the comp committee because maybe there's other, other things that that comp committee director had in their favor or something.

[D]

I saw an early study that where they designed an AI model to take in more information and give vote recommendations and what they found in the early AI models was they said their recommendations were to vote against more directors and management proposals than had then, then investors were doing which would mean, and we're not seeing that in the data, we're seeing this like same more support for management which would suggest that like saying you have an AI model is as simple as voting with management in every situation that isn't an activist situation. Then you do some due diligence. So it'll be interesting to see over the next like 2 years whether or not these air quote AI models are actually used and how they're used or how they're tweaked to basically just have

[B]

the same outcomes or who, who sues who first? Because the AI model.

[A]

Well, there's that too.

[B]

Did something crazy. Okay, so I'll, I'm going to hand off to you, Matt, but I do have some data based on what you just said. So the interest. And this is all just to say that we're the, the, the fight against ISS and Glass Lewis is working like the, the, you know, the, the fight in our, you know, the political theater of, of railing against ESG seems to be working. So in fact, this year ISS backed 48% of all proposals in 2026, which is way up from last year when they supported 34% but it had no impact. So people are just, they're not listening like they used to listen. So I'm gonna, I have more that I'm not gonna get to because we need to, we need to roll. So Matt.

[A]

Right.

[B]

Why don't you finish this up.

[D]

I want to do a speed round to end this. A speed round of a couple of questions. I think there's about six questions here where it's just yes, no, did it matter? And we've answered some of it, but we'll do a speed round and then a couple of questions that we don't have to answer now, but we'll throw out to the universe.

[A]

Well, we're gonna do, we'll do a crossover in January.

[D]

Yeah, we. For January coming up anyway. All right, so let's start with some of the did it matters? Ready? No action basically set to ignore by the SEC. Did it matter in 2026?

[C]

I say yes, I think it did it that some companies and it will matter more going forward, but I think

[D]

will matter more, Damien.

[B]

But yeah, I agree with and I think what it means is more for the entire. I'm pulling back and looking at the entire landscape of it's absolute consequential what it, what, what it means going forward. But did it matter? Like year on year? I'm not too sure. Maybe it mattered but, but, but the overall effect of it is, is massive.

[D]

So it hasn't mattered quite yet, but it will matter.

[B]

Well, you know, we're in a, we're in a very like, we're in a France. You know, Ann talked about it at the beginning. Just the, the sheer amount of, of, of proposed changes piled on top of each other. This just chaotic, you know, effect of deregulating and and tearing it all down. That's what really matters.

[D]

All right, so in that vein, Dexit, which the early conversation around exit was Delaware's just fine. Right. Like there's not a big giant move. And this was back in, you know, like, you know, last April. We're talking about Dex. It's a talking point. But does it really matter now, this season done or this. This voting agm, period, done. Did Dexit matter?

[C]

I think it. I mean, for me, what I'm looking at is like, yeah, statistically, I don't know that there's that much movement out of Delaware, but it's not that. It's how Delaware responded. It's that Delaware responded by dramatically changing its law. I think its judges are probably going to be more, you know, treat challenges to board action more gingerly. And it matters in that sense.

[B]

Absolutely.

[D]

All right, that sounds like everyone agrees then. How about the anti ESG movement, the lawsuits against the states, the sheriff proposal rise like the anti ESG movement. Did it matter?

[A]

Nope.

[C]

Yeah, because everybody, like, Because.

[A]

Oh, no, you're not. The anti ESG proposals, the.

[B]

The. The opposing. The right fight against.

[A]

Oh, yeah, I'm sorry. I misunderstood. Yes, absolutely. It did matter.

[B]

Absolutely.

[A]

Yeah.

[C]

I mean, it's not like the lawsuits are like, you know, right. Right now, like, the states are trying to, like, clip proxy advisors wings because of ESG and all that's failing. But that's not the point. The point is it's getting people to, like, you know, investors to try to back off ESG and not vote for it. And, and, you know, ISS changed its policy recommendations on esg. All that.

[B]

Yes. So it's not. That's important because it's just what you said about Dexa and is that the. The right has won the political theater aspect of this because the. The ESG world, whatever, whoever that is, they don't fight back on any level. There's. They don't create resources. Okay, but maybe. Maybe that's the case. But, you know, there are clever ways to do things that don't cost a lot of money, but.

[A]

Well, yes, and again, that gets in my. My contention that the problem with precatory proposals isn't the proposals. The precatory part is that. Is that it's a community that doesn't. Doesn't, you know, push its agenda as hard as it could in the most effective ways. Yeah. So.

[D]

All right, well, let's move on to other egregious things. Musk's pay package, which passed just in this last season at Tesla, which.

[C]

Which very One.

[A]

It matter to Musk? No, he moved on. He did the SpaceX.

[D]

But that package, we said in our December crossover show that, that there was a potential mini Musk packaging. It doesn't matter.

[A]

I've done it. I mean, Ryan Cohen, I can't remember, is it Ryan Cohen who came up with 35 billion dollar payback? Yeah, there's, there's a bunch of copycats that are coming out, but he's taking

[B]

it off the table because he's desperate to buy.

[A]

But there's, there were a bunch of other.

[B]

No, you're right, you're right.

[A]

CEOs and others that have said, okay, we're going to set these, you know, audacious goals.

[B]

Not only that, hopefully I'll get them though.

[A]

Oh no, wait a second. I mean, well, I think what's worse was either.

[B]

So what's worse he will be if

[C]

SpaceX buys Tesla though?

[B]

What I think is. Oh, go ahead.

[C]

Well, no, it matters in this sense. If SpaceX buys Tesla, depending on the price that SpaceX pays, his pay package at Tesla is triggered. So he gets more shares, the more.

[A]

Oh yeah, the Tesla pay package will pay out. But it's, it's not because the market loves their.

[C]

Right, right. Because SpaceX pays, you know, 2.5 trillion for Tesla, then he gets another 70 something million Tesla. Right.

[B]

Here's what I think is worse is that what it's done is it's, it's degraded the, the market of people caring. Right. So, so test. Musk gets his pay package. So many people support it. And then, and now and say on pay, everyone supports pay. And now what we're seeing is companies off proxy, off policy. They're not even part of the policy. They're handing out massive retention awards because they know there's not, no one's gonna care. No one's gonna fight back. And there's of course.

[A]

And you can't pay over it now.

[B]

And in pay, you see this more than anywhere. The copycat effect is. It's just, the domino effect is like a, it's like a fire in Colorado. Sorry, Ann, but. Because everyone just copies it so. Because no one's gonna do anything. They know that no one's gonna push back.

[D]

All right, two, two more ready? This one I think we can agree on. And maybe in all the same direction, exempt solicitations are dead. Except for the super rich. Does it matter? Did it matter?

[A]

No, absolutely not. They never, they never mattered before.

[C]

And I'm going to now cite the paper because I knew you were gonna Ask the notes. It's called is there power outside the proxy evidence from exempt solicitations? And it's actually been online for a while, but they just updated it and it shows that institutional investors access those exempt solicitations and it affects. Affects voting outcomes.

[B]

Wow.

[D]

I like that.

[A]

I'm surprised, but I have to go read that.

[C]

It's a real.

[A]

Yeah.

[D]

That touches me personally. I would have said it was an easy no.

[C]

I would have thought so too. But there's. There's data. I. I am not an empiricist, so I'll let someone else decide if they want to do.

[D]

I love being proven wrong. Finally, J. Hogue, the Netflix director.

[A]

The Netflix director. He.

[D]

Well, no.

[B]

Now chair. Now chair.

[D]

Now chair. He was leading the place.

[B]

Leading the director now.

[D]

Biggest jump in 2025, 74% against vote to 93% for vote in 2026. 2025.

[A]

He did more meetings.

[D]

He attended one meeting.

[C]

Your one from your newsletter.

[D]

One more meeting is what he attended it. Did it matter? Attending that one meeting? Did it matter?

[A]

Well, matter to his vote, I guess, but it didn't matter to the board quality and how Netflix has done. Netflix has much bigger problems in their stock.

[D]

That's what I love about. I love that.

[B]

Do they.

[A]

Yeah, well, I mean it's doing fine, but it's still. You know, they're trying to look for a deal. You know, remember they were the ones who were trying to buy Paramount.

[B]

Yeah. And I think they're. And that felt happy. They didn't.

[A]

They got a break fee. But now they, they're. You know, that's the, the. I don't follow media too hard, but they're, they're. There's. Everyone's urging Reed Hastings to go try to find a deal.

[D]

So anyway, Reed Hastings, who's no longer.

[B]

Supposedly doesn't work for the company.

[D]

They're definitely talking to Reed Hastings. Like they have co CEOs who basically just call up Reed when they have a problem. Those are my. That's my speed round six questions and just a couple of thoughts into 2026 and 2027. Until next time we meet. I think on my mind, in a non activist situation, does anything except attendance matter in a director vote? I'm pretty sure the answer is no.

[A]

But no share price to share price.

[B]

We have a smaller cap.

[D]

Zero correlation between share price and director votes. In the absence of an activist. When there's an activist.

[A]

Right.

[D]

Yes, sure.

[A]

Right.

[D]

There's no activist. Everyone's 96% for our activist shareholder proposals dead Right. Like there were a lot of activist shareholder proposals, like Chip Wilson was trying to declassify the board. Is that going to be like a dead space? Is it all going to have to be backroom negotiated?

[A]

Yeah, probably. Again, they weren't really as big a deal as they could have been with, with, with, you know, activists though. But yeah, especially under 14.

[B]

A8 the. I will say this.

[A]

You're gonna have a problem with it. Go ahead.

[B]

I will say this, Matt. The only way this changes is that the general public realizes what they are and they fuse their hatred for things like data centers and AI and can use this mechanism to do something splashy, use social media to, to gain attention for, for issues like this, then anything could change. I mean, again, you, you finally have an issue that everyone can agree with. It's a, it's a, it's a massive issue. And so I, I don't know. I mean, it just depends if people open their eyes.

[D]

I mean, I, I think the answer is yes or dead.

[C]

I'll.

[D]

And I'll end with this final thought for 2026. 2027, and that is AI China. AI. AI. AI China.

[B]

China.

[D]

China.

[B]

AI China.

[A]

AI China. I don't understand.

[D]

2027 wrapped. That's. I just wrapped it for you. We don't have to talk.

[C]

Very boring.

[A]

We'll see, we'll see everybody again. Another crossover sometime soon. We have a lot to talk about between then and now, so let's, let's, let's let our followers here move on to some, some other stuff. How about Shareholder Primacy and also Proxy Countdown? Shareholder Primacy is hosted by Ann Lipton and me, Mike Levin. I'm an independent activist investor and advisor to investors about their activist situations. Ann is professor of Law and The Lawrence W. DeMuth DeMuth Chair of Business Law at the University of Colorado Law School. And you can find me [e-mail] and ann@law colorado.edu. as we said, this is also Proxy Countdown with Matt and Damien. They are at Free Float One Word LLC for your data. Some of the best board data out there. Our podcast is produced and distributed by our good friend here, Matt Muscardi at Free Float Media. There he is. Thanks for listening to this wonderful crossover. We will talk again soon.