“Short Slate” Rules: A Recap

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“Short slate” proxy contests (i.e., contests where a dissident is soliciting proxies in support of nominees that, if elected, would constitute a minority of the board of directors) are expected to continue to be popular during the 2013 proxy season (see, for example, the International Game Technology proxy contest). There are several strategic and practical reasons why a dissident would choose to run a short slate rather than a control slate, including, among others, the perception among stockholders that adding a limited number of a dissident’s nominees is often of some benefit to the company and usually not particularly disruptive, a comparatively greater willingness of proxy advisory firms to support a dissident’s short slate rather than a control slate, and the fact that dissidents may want to achieve some influence through a successful campaign but may not want to run the company. What follows is a recap of the basic dos and don’ts under the “short slate” voting rules:

• Rounding out with company’s nominees: Notwithstanding the “bona fide nominee” rule (requiring the consent of any director nominee to be named in a proxy statement and to serve on the board if elected), if a dissident is soliciting proxies in support of a short slate, the proxy rules specifically permit the dissident to round out its slate by including in its proxy card nominees named in the company’s proxy statement without obtaining their prior consent. The rounding out permits stockholders to vote for the dissident’s short slate without foregoing their right to vote for all seats up for election. A dissident’s ability to round out its slate with the company’s nominees is subject to four requirements...

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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