Transcript
Welcome to shareholder Primacy from freefloat media, but also a very special free float media crossover episode as followers usually know, Cheryl the Primacy is a podcast about activists investing Securities Law and all the ways, the financial legal world's intersect in colliding, real life. I am here with what Matt mascardi. Yeah. Okay, hold on, Matt mascar, 36 co-founder of free float analytics, he's coming to us from Connecticut. I'm here with an Lipton. I brought an with me this time and said it was you and 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. Other co-founder? Yeah, analytics coming to us from Portland. Maine. Yes, this is all. So let's not forget, this is all the proxy countdown for the week of December 15th, right? We're part of this, too. This is our show. Oh, it's just We're doing something very special despite Mike's lead off. We're all. We're all hosts for all together hug. It's a free says family hug. Yeah. It's our holiday party. Yes. All right, Damien, what else? Yeah. What are we covering today Damien? Well, I can I can tell you what I'm covering in my segment. I'm gonna ask very simple question. I'm gonna ask you all to give me predictions about the upcoming 2026 proxy season which is really kind of changing every day. Yeah, literally I it still a lot of stuff going. Yeah. So I did they cancel it yet. So I'm gonna simplify it and ask you to just kind of give me some guests, some estimates, some numbers, right? Very well, we do that Mike's, gonna do some stuff. I'm gonna, what I can do is to me, so I know, but let's let's start. Okay with some some of what happened. In 2025. Wow, that that kind of gives us a little bit of I'm going to go to the context and grouting feel free grounding about what about what we saw. An and I have spent a whole year tearing down, all sorts of, really fun developments and activism and Regulation and Securities Law and shelter proposals. And so that we were thinking, we would kind of go back and look at some of this and, you know, understand some of our thoughts, opinions and interpretations of what what took place and then use that as sort of a jumping off point for a look at what lies ahead. Sounds good everybody. Yeah, so this is like a, this is like a best album of 2025, 20. Yeah, Spotify. Raptors got it. Sorry. Alright. Well let's begin with some some interesting events. For me, one of the biggies was the Tesla ago AGM annual general meeting annual general meeting borrowed from our from Western Europe. I always used to call the annual shareholder meeting, but I 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 big ease, of course, was kind of ratifying the king, the king, right? 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. Okay. So some versions and you you enjoyed it. When we talked about it, you know, Tesla is, you know, is is an ever never ending source of amusement for her for, for business law, professors, but it's never boring. We can, we can leave it there. True. But you know what we saw was, of course, Tesla shareholders voting to restore his old PayPal package. Should the Delaware Supreme Court, uphold the Chancellor's decision and to give him a new pay back Edge, that would give him essentially up to a trillion dollars or in stock if he needs very small stones and you know, from a legal perspective, the entertaining part of that was that Elon Musk and his brother, both got to vote on most proposals. Is Tesla has made it impossible for shareholders to sue in that. They've moved to Texas and right and it took place. The vote took place under the laws and auspices of Texas, corporate law. Yes. But they're not gone from Delaware because not only the pay package thing that's still under review by the Jailer Supreme Court will probably get a decision within the next month. But also, you know, shareholders before they left for Texas. Like just under the wired new actions against him and the board and those are still pending before Transformer McCormick, does does still works decision even matter at this point it does because if they don't restore the PayPal package under Delaware law, if now that the shareholder vote is what gives them is payback is back the tax and accounting implications are there. Horrified really wants Delaware to just reverse McCormick because at least that way they get the payback is back without having to deal with how this plays out for tax and accounting purposes. 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 gonna win and what's the chance record going to do and nobody quite knows. I've asked you many times and you refuse to guess but is it fair to speculate that musk himself is worried about a given that he literally just this week is talking about IPO for SpaceX preparing for something else. But no doubt it will not be a Delaware company, but it Delaware company for sure. But he definitely is going to come out like he's gonna have a trillion dollars in in options there. That's like, it'll probably be a dual-class. It'll be probably Basics is right now in Nevada company. He'll probably stay in Nevada. I mean, he might switch to Texas, but it's certainly won't be delivered. I imagine he'll go public with the Dual Clashers system, because one of the things that really upsets him is that he can't get high vote shares a 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 boat system. Yeah. So I would expect that. Yeah. He He envies all the other techno Kings, you have this dual class shares structures because let's not forget he's not an actual founder of Tesla. He was not there at the beginning, he's just to be a founder. And he kind of ironic that he like envies dual class shares, given that as an you said that he and his brother are voting on 20 plus percent of the shares. All ready that they own to vote and, you know, he basically has a die-hard legion of retail fans that owned 40 but he, it's embarrassing. Exactly. Yes to promise. All right, all right. There's other things we got to talk about. We'll return to this. But another part of the problem is all this stuff was stacked and like the last quarter. Another thing that happened it was only a two months ago was Exxon Mobil. Excellent mobile now is a trying to get Irrevocable proxies though they're not called that from all sorts of retailers. We installing a call Perpetual shows though and someone wanted somebody here at another good word for it. A permanent anyway so it's perpetual proxy and it was Perpetual. Yeah, so yeah. So like basically Exxon is gonna try to lock in retail votes in favor 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 their voting to the management, it's likely to stay that way. They'll forget about it. It's like, it's like subscribing to something. Yeah, gym membership, right. 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 gonna work for them. So, and it was first, I know, I mean, the big question was whether other companies would adopt a similar program and I am unaware of that happening. Right. Go ahead, somebody I was gonna say this is this is what I'm most fascinated with too. And it's a bit of a tangent here, but but given that the ease to, which we can now companies can now restrict shareholder proposals from their ballots, which companies will go the other way and say, no, I want to know what the shareholders think we're gonna put these on the no, no, no, no, they do stop you, right? They do not want to know what their just an anti-walk proposal, which they saw to exclude before the SEC changed its policy. And so, the SEC with that request to exclude sitting on his books, just refuse to answer. And Costco could have left it off. I think that would have been minimalist for them but they chose not to and they're allowing it to people. Oh, how interesting. I didn't because we've tried that, of course, of course. It's Costco. The first one. The only company that company was playing by some set of rules that nobody else is playing by. But but practically, when you're talking about Exxon retail, vote capture, right? 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 actress campaign in 2021? 20. That's a big one. Was that right? There was a report in Financial Times With other co-authors where they were saying that, that really stung more than I would have realized like saw that and they're like still mad about it. Yeah, right, even though all those guys are co-opted it at this point, but the following they voted the same directors that got voted on by engine number one, where on board suing or Juna Capital one of their shareholders rather than going through the SEC process, those same directors. They actually, the next year, they diluted 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, and B, the Practical outcome of, getting the vote share from the retail, is they think no one was Voting out, but he to begin with you taking the emotion out of it, which is that it wasn't in the first place. Yeah, I mean again, it's a masculate in It's amazing. So it is because I I'm beginning to think you're right. That that is the well most explanatory power of anything because it's really we analyze the people that the engine one put on and really they were all basically the types of people you would expect on exons board. They weren't these crazy environmentalists. So it, there were just upset that it wasn't their decision in the first place. Yeah. Oh, wow. All right. So so Exxon Mobil did that. We're wondering and we can talk a little later about whether anybody will follow. I do know that Davis pole has been very busy. Fielding inquiries. They're the ones who kind of helped cook that inside her knowledge. That's that's like no. I just heard. You know, that just anyway. Other things that happened. It was actually There was no really unbelievably high-profile, high stakes proxy contest. in calendar 2025 not like Disney right now, like, Disney like down now, like those were, um, you know, you know, Our friends and I have friends there at Elliot management. I don't really, I'm just yeah, no. I know some of the folks there. They're they're 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 bhx, 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 was started soliciting proxies for a proxy contest normally there. So feared and so good and so aggressive, I can't remember, it's been if first time in a long time, and they may have done one year ago but and one of the first time for sure that they'd ever take one to a vote, And they got two out of four seats and it's a testament to Universal proxy. How it 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 5 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 I just started they just announced 5% threshold of Toyota today yesterday, right? Oh yeah. I mean they're like I mean if I had to think of a single very large, Feared activists that has sort of assumed them 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 peftok system so forth of the world Elliot's. Elliot'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? Industry and Toyota Industries. Yeah. It's it's there. It's still a lot of Toyota's. It's a car Parks, right manufacturer. So Ellie it was out there along with some others. But Ellie was I think the most high-profile Financial activists that was that was trying to get stuff done and but there was the other reason why it was really noticeable that they got the two seeds, which is the big three voted against them and they still Yes. Succeeded right. Which is which really is interesting just because, you know, there was originally this chatter that the Trump Administration Would try to minimize the voting power of the big three and various ways. And what this really demonstrated is that there are much more prominent than 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. But it's and 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 worried 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 and so many pots and are subject just so much regulation that they're mean issue, is always going to be please. Whoever The Regulators are and that may sway how they end up voting on things and that's my concern. So yeah, go ahead. Matt, that's their pattern. Now they did that, you know, like when they sort of swung quote on air quote left, right? Yes, and the 2020s it was the same. Yeah, same reasoning. Just then actually what's more interesting to me about the the voting patterns with the activists is how the proxy advisors have been positioned with the activist because when it comes to a standard proxy vote, they seem to do do a lot of due diligence on shareholder proposals, when they exist and then sort of vote with management. Otherwise usually the general recommendation but with an activist he can go either way. Oh yeah. Don't they actually play a role in the and the big three voting in One Direction. If I assess says well, 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 are 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 like Relatively random or arbitrary. They also voted. The. Repeatedly recommended. Again, the musk pay package stuff and that stuff passed as well, right? So yeah, the proxy and we, and we've already talked about this, a little later, but, you know, proxy advisors are fending off, all sorts of assaults and pressure. It's a whole government approach to attacking proxy, advisors at state and federal level, right? You know, you know, we got ulcers stuffed even just this week, which will get to. So, that was another thing that was worth mentioning. But I think we just kind of talked about a little, but it's the proxy. Advisors are facing potentially more pressure than they've encountered ever before. They've they've, you know, they've been hauled before Congress. They've done testimony, they've done all sorts of stuff. But I, I sense that this year and you guys Matt, Damon, you know, the proxy advisors, as well. So, anybody, but anybody at least here this is, this may be, this may have so far been their toughest year yet. Is that your sense? We talked about this this morning, I I don't know what any of it is which part of his real anymore. There's there's so much political theater spinning around that to me, I don't into Matt's point, you know, four years ago. They were acting in a different way. I, as long as they're in business, they're fine, right? Yeah. Do we think that this is gonna Matt? You're hesitating, you think this is gonna have a profound effect. Take an outcome based approach to what they actually do, right? Like, what actually happens. And I'm talking about, these are companies, the proxy advisors are covering 10,000 companies like companies, right, go globally, right? Like, which is the first problem. So, all right, then yeah, you can't exactly cover that. It's not a scalable concept. So, but on average, the average shareholder proposal got what 17% approval, right? Like, so vast votes against with some exceptions like Jim Richie. And John Shiva, And their votes might win occasionally and their non-binding so it doesn't matter. The average director gets 96% vote 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. Oh, I just want to know. I, I understand what we're angry. I understand there's a faux populism going on and I understand that it's great talking points, right to to battle against the ISS and glass Lewis and to pretend that the woke left is infiltrating capitalism. I get all that. I just want to know how does it actually affect ISS in class Lewis? It's just right. Like is it just more? They're just there's maybe there's more little hop to manage. There's more reporting they'll have to do. But no, they tell me in. Well, I tell me nothing's happened. So let's be really, that's true too, right? 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, right? And one of the big things that is being is on the table and they try 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 management. You finish your application about your shares, then 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 just doesn't make it cost effective to hire them anymore. Okay. So it to that point, you're correct that could have an effect on the business of isss in 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 left. Well, whatever to the whoa, whatever whatever. They well they're claiming it's well, but I mean, you know, my experience this is that this is really about his things like executive compensation and you say ESG but really they just don't like being voted against. Yeah, well to me, it's about binding votes against cop, don't matter. Either to me, it's very adjusted to me. It's very simple. This era. That we're living in and and now it's playing out. The proxy advisors is that 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. There's nothing else happening. It's every single level. The idea is to essentially, consolidate authoritarian view of the corporation and monarchies every year where you look. Okay. All right, let's let's talk for a minute. We got a couple other things to cover them. We're gonna take a break. All right, right. New one for. Let's talk a little bit about developments in our favorite domicile state. Delaware, oh boy. And fortunately we have a Delaware that's Delaware. Once I have to take like a like a field trip and just, 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 it's usually just like Court decisions to it. Right. And that law. Essentially. Made it a lot easier to be a controlled company. I would, that's how I would describe it. Yeah, it did more than that. But that's absolutely. I mean just and this is again to like Damien's point about this is about consolidating power and 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, did that happen one. I think that what Tesla City Oracle and what Netscape, that's sweet, whatever. But but they were said, you're gonna get sued and you're gonna lose if you do that, unless you put in a number of really owner's measure. Well, not onerous by normal standards. Like, I tell you, they still think it's ridiculous. But, but by Delaware, standards owner is measures to protect against these conflicts and this new law took all that away they made. Very, very easy to engage in various kinds of conflict transactions without being challenged, which is the whole point, and they made it harder for shareholders to get inside information, through books and Records. So it's all part of consolidating power in this handful of people and not letting anyone including the shareholders Challenge and certainly not the courts challenges it well to your point, go ahead. It's you said it. Well, because what they're all doing. What they also announced in the past few weeks is there, 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 a special this year. The companies that do IPO and they're the same type of structures that you just described in their, their, their companies, controlled by do Klaus shares by just the founders, right? There's no one else that has a voice at these companies. They're they're classified boards so, so it's the same thing. They're, they're just trying to to get that market going, right? They're just trying to get those companies. Launched and this is the type of company. They love ya and Delaware just basically Removed. A lot of the burdens that might have been on a company that launched that way, right? Otherwise, you would have gotten a whole lot more, you know, Flack in Delaware, if you went public that way, but no is no longer. But so the fear overstated like like the, you know, Delaware's fear was that they were that they'd have a dexit, write the mass Exodus of companies out of Delaware into States, like, Texas and Nevada, but it seems like that hasn't happened. It's been mostly like Marc Andreessen well. Mostly, I mean, it's almost all control companies. Yeah. But I mean, part of that is because Delaware changed its law. I mean I we may very well. Have seen more had Delaware, not changed his life. I mean, you know, yeah, 30 or 35, 30, or 40 in a bunch of microcap companies. Haven't gone to Texas though. They've gone to Nevada. Most of that, right? Yeah. Ben Edwards has been keeping us sort of running back. Edwards is Loper at the University of Nevada. You know me, right. Um, but yes, so at you and Ellie 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 it I think Delaware's fear wasn't just public companies will move, although that was part of it, it was new companies will not go publicly Delaware. So we may not have great Insight. That's that, that I mean, if you look at the Delaware incorporation data that, in my opinion, that fear was way overblown because there's, there's like, Delaware gets Tens of thousands of new incorporations a year. And VC's routinely say if you're Incorporated somewhere else. They need you need to start? Yeah I mean I my view is probably that there was a real risk and probably some of the law had to change but it was extremely what they did and I don't really buy that they had to go that far in order to keep incorporation. I believe that they had to do something. All right there are other developments. We've. Talked 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, let's do it. Thumbs up. Cool. All right, we're gonna take a quick break and we will talk about what we learned from all these developments the in 2025 and how they will unfold in 2026 here at I'll say shareholder Primacy. And at proxy countdown, that was weak. That was beautiful. Shareholder Primacy is brought to you by free float, analytics.com. The only free database of corporate directors, their influence and their performance. If you want to stock or retirement plan go to free float, analytics.com and look up which of your elected directors are performing well, which aren't use your vote in the alternative democracy and get your data at free. Float analytics.com. Now, back to the show, The shareholder Primacy countdown crossover. I'm and Lipton here with Mike Levin, Matt McCarty and Damian Rallis a free flow Analytics. Damian, I'm supposed to say what's up but I'm not. Okay, yeah, I was looking. What are you, what are you? Oh, don't get me going on complaints. You know what, I I'm gonna I'm gonna keep this optimistic and to that, and I want to hear. I want to hear predictions for next year. Lead us. You're all just make a lot of money, how's that? Okay. But that's not always your prediction. Yes, right. That's my. That's my aspiration. I'm gonna put the reality is, I want to dumb down the conversation and I want to. Yeah, but okay. I've done my best to cut a categorize. This into three different categories. Directors. Sheriff, proposals and pay, and I want to just get, and there's no pressure here. We don't have to do the systemically but I'm gonna 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. I do, that's your guys business man. Come right, I love it. 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 than the natural Focus Point has to be what has to be directors, right? Because the really the only proposals that will be left until they get rid of them because we of course we predicted that they're going to get rid of everything soon enough. They'll be an auditor vote, they'll be a say on pay vote at most companies and they'll be a directive vote. So Matt and I'll start with you, are we finally gonna see directors voted out of companies this year? Not just for the j-hope reason, which is that they fail to. Well, we actually start to see pressure on directors because they can't, they can't exercise their conscience on children proposals anymore. What do you think? Well, so, two things are true, right? Like we have to discern between activists campaigns and regular old vote and answer. Anyway, you want? Yeah, yeah, exactly. And and then number two, The historical data on it 0.2% of directors historically, get voted out right globally on an annual and meaning they lose that they have less than a majority of shares in attendance at the meeting. Vote for that director. Does it mean they actually lead the board, right? It just means right, the whole, that's a whole zombie situation. That's those are the directors that that get less than a majority and may or may not stick around. J-hope is a perfect example of somebody who stuck around twice after getting less than a majority, right looks. Alright, 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% for really lucky? 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 on anything. When you look at particularly given with the early in the year, there was the 13d guy, right, about how they about, how you influence on, how Shareholders interact with the companies because they don't want to file 13, date and commissioner uida. And you wrote about this the daisy chain problem, right? Where where like yeah, explain that because all of that kind of matters, it's in the new executive order, I think it is incredibly legally spurious, but that really hasn't stopped this admission executive order. Yeah, so, I mean so the Idea, 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, 13 days. 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 13 group and have to file 13 days. Now again I think that's really legally questionable. But you know how hard anyone's going to fight about that? To establish is another question. Well, so then the question is, like, with Banks two questions, if you buy a sell-side report from Deutsche and so, does everybody else, are you all agree? Are you like, like that's? That's the idea, the burden of proof, which I think you're right. And 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. Yeah, so what you saying was that he wanted to apply Only to people who sort of automatically just like just vote robot 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, it might succeed. Yeah. 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 analysis needed for Calpers who has a staff of three to cover, 80,000 directors of the position of the Trump Administration has been that you. It's fine if you're voting for management analysis, because because the theory being that management has fiduciary duties. So when they make a recommendation following their recommendation is okay, because they have to share to the company. So it only works if your body gets 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 that. That's that's the interpretation. 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. So, where do the, where does the? I won't call it the anger. Where is the, the constraints of the groups? I think we're gonna direct it at. I think it's gonna be directed at directors. So I think to answer the question, is it going to go up or down from point two point two percent, I think 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 I will be a few interests, more directors that are going to just fall under the thrush. Or 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 shelters, are going to be on Happy anyway because of share price, or you know, and so, so they will succeed in, nudging up the needle on that, a little, because the initial targets, like the long, the long tenure directors. Yeah, like no, it's gonna be the conflict transactions that you can't sue over in Delaware anymore. I think that's gonna be it. I think. So it like, I mean, I'm not sure. Like I think they're a lot of pressures here. I think if proxy advisors are like intimidated into, not recommending against directors. If you've all kinds of things like that, but I think that if there is a vote, no campaign pick up. It could easily be these controlled companies that no longer have to worry about cleansing, their transactions through Delaware, standards, etc, etc. And only Outlet is going to be voting or, you know, voting now 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 J Hogue phenomenon. Where the Netflix board said, Jay, you committed a football, just a 10, more meetings, just come back, we love you, you were a Founder. There'll be a lot more than the companies. Boards will rationalize this. By saying, saying, we understand that shareholders are unhappy and you've expressed it that way. But this directors really valuable right, even though just destruction, go ahead, it's one of our favorite lines, right? Is that they say it's actually in the best interest of shareholders? Yeah, that's right. You know, so there'll be more of that. All right guys, shut up now. No, it's fine. It's great. Let's segue over to shareholder proposals. We kind of touched on this earlier and we talked about Costco. Will there be other costs? Will there be companies? I don't know, maybe, as a Political gesture. Maybe as a gesture to the shareholders maybe he's a just a might go ahead. And I just were so I you know, I have my the my subject whatever I write about this stuff and right after the SEC. Issued or at? It was not Atkinson's speech. It was the the statement I think you call it a statement. He said we're not going to really we're not going to participate in the 4188 proposal process. I said in a post I think 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. Wow, I think I know, I think that there are a lot of companies that You know, any company that was seeking for 1488 relief? For Cheryl the proposals, which is a lot. Are going to continue to do that right now. There's, I am sure everyone's seen this you know the SEC really cleaned up. They stood up a great little website on Cheryl to proposals. They're really responding 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 ten 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 14. AA redid, their requests 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 it, you know? And so I think there's a lot of companies that had been submitting. These will continue to sew. 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 not. But 900 children, proposals it, us companies and 2025, there's going to probably be that's right. Or 400 or fewer. Yeah. Because the biggest issue here is that the company take? Absolutely, no legal Risk. By excluding them, frivolously true take any legal risk because they know the SEC. 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 suit and said, you illegally are excluding my proposal. The company says, whats your right and put it on like, there's no rest, right? 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 Republicans from somebody with a small number of shares, so you think he'll be proponent based like who, which the allow certain proponents up and they'll exclude others and important part of the Costco being like I Have good feelings about Costco. Their government corporate governance and so forth. But who was the proponent on that? It was somebody who will sue you, if you exclude that right before interest 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 Chevette. Right. So some of the basis was a little disappointing. It had to do with missing a filing deadline or not having enough shares, but some of them were on this substantive basis that the SEC usually uses to exclude, like ordinary business or whatever. So, um, yeah, when we go back through the data on 2025, the, the only shareholder proposals that really won in 2025, were John Chavez and Jim McGee, the one who are most likely to get excluded. And those proposals were not proposals for like, oh, serve more orange juice at the annual meeting. They were proposals, like a Declassified Just that just happened. Like, it was a Chevette and Declassified the board one and it got like a huge, huge number shield. And that's. And that's actually, my next thought is that this happened this week Tuesday. At Palo Alto networks. Jimikki 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 Ann's point. This is mind-boggling. This this past a shareholder proposal passed with 93% support. That's insane. Is this about is this is a bellweather proposal from the next season. Like, does this say something or is? He think this is only about Paulo works. The Bell weather is right, the Bell County, everything Jim McGee and John put on because there's high risk that it could pass and you look bad. If it goes to vote in the past is, you don't look bad. If you just exclude it and there's no legal rest. But you think this vote was like Is this all about Paula Network? Do you think this vote was like, kind of oddly charged in part about Palo Alto networks? Okay. Shares have not done. Have not kept up. Wait. It's other Tech peers. Okay? Because I was gonna say I looked at their at their five-year stock price, it doesn't seem terribly down what you're saying. It's not you're saying it could be higher compared to that, right? I mean a Paleo off, the Network's 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. I will say this to that. 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 pace. So I'll throw this out there. Are we going to see a lot more? Say on pay failures knows again because this is gonna be one of the only things that people can vote on it. 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 very serious ways and, 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 number of proposals that it was it was met up platforms, right? Yeah. Alphabet 13. Yeah, I think it's going to be Many fewer. I think they'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 three or to prove a point, otherwise, right? They'll use it to demonstrate well since only 11% supported it proves why we're not doing it in the first place. Yeah, they know it'll I think Ann's point is the right one? They can just look at the pockets of the proponent and John's not going to sue you but now National legal policy Center will be for they, they might as well because it's basically an arm of the Heritage Foundation. Right? Like so they have access to a capital that they could, if they really wanted to or find a friendly or friendly finder or whatever, you know, like, figure out a way to sue him for discrimination. But yeah, I I think that pressure question is right, but I don't think it's going to spill. I, I disagree with with mic 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% votes for every pay Committee Member which is like, well, what do you actually saying to the company? There's no accountability here, right? Like the, the vote that might be binding, which 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 but you know I think I think Mike you're probably right that the pressure will redirect but I don't think of redirects it directors. I think it's like maybe an auditor fails this year because right. 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 the dustiest quietest most boring proxy season in existence. I mean, I I don't hear that. You think anything's really gonna happen, they're gonna exclude most shareholder proposals, and the directors won't get the fire. And I'm out hearing that, you think that they will change much what? So nothing it's gonna be just a big nothing, is that what you're predict? Now for financial activities you can already tell. Okay, there are Right now, in December 5, live proxy. Contests. That's where you think the going to shareholder vote? Yeah, there's gonna be a lot more of that. There's all sorts of there's also some money there. There's lots of lots of activists that have the assets right yesterday. This week. You know, Bloomberg has an annual activism conference this week. Four really good activists announced four new projects, 13, D was last month or month and a half ago. There was bunch of projects out there. There's going to be a lot of I think there'll be a lot more of that again, Universal proxy made it a lot easier and they're fine people finally getting used to how to use that. Um, there'll be, there'll be, there'll be more of those. And my question is why? Because of the, the short term success we've seen in the last year or two or because of the, the changes, we're seeing the changes to the shareholder proposal. Like, why do you think, why why is there increase? Um, there's the, I think the Market's going a little sideways or is going to start to go sideways taking advantage of a sideways Market. Yeah. That's gonna 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, well kind of what kind of lead their Which is it's good for me and the people I hang around with. So, yeah, I'm okay. I'm okay. All right, there'll be a separate file and I'll use them together. I will be great. Let me say one more thing before you did before heading up to you Matt. Is that no 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? So to Mike's point, is that what we're seeing is that the activists are just take, they're only ones sort of shrewd enough to take advantage of of a changing landscape. Is that what it is true. There are only the only ones with enough Capital to take with the resources and resources and the will. Yeah. And, and the Mandate from elps, the Mandate, from whatever, like to actually activist get changed. Yeah, you need the resources, you need the ego and you need to know how, right? Like you need to be able to success, right in the shortly. 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 Single lawsuit, you know like right you know Jim McGee 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 we're used to that. That's right, like that, that's nothing. But if you, if you're going in with like 100 shares, right? You're out. You're out. All right. Matt take over. All right, I want to make this a speed round. Give him the time that we're at. I'm here. We're here. I have a witches more likely speed round for 2026, which is more likely which is more likely. I'm gonna give you a couple of options I'm going to I'm gonna tell you ask you a question effectively and I'm going to give you a couple options you pick which is more like lady 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 a reporters of, 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 and mentioned this. It was already on Anne's blog and like we sort of talked about proxy advisors already effectively the SEC. They order asks the SEC to consider a whole bunch of things including rescinding 148a 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 Did 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 like a legal basis, sort of legal adjacent, right? It looks like alright so does the SEC need to more likely going to redefine anti-fraud laws? Because currently the way the Securities laws 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. 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 sales security 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 Here, the DC circuit said when proxy advisors make voting recommendation, they are not soliciting products, right? Because because the client is asking them for a 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 if anything to do with that. So the SEC would have to somehow redefine the fraud, like passing a new statute, I mean that's gonna require active Congress, right? They would have. They redefine what it investment advice. Fiduciary is right? Because Arista sets, out, loyalty care, prudence, and it applies to discretion over a pension fund for a fee. 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 statue essentially says you're an investment advisor. If you've got biting selling not voting, nonetheless ISS has registered as an investment advisor because it just didn't want to hassle about it. Last Louis. Existed 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 registers investment. Advisors my response is largely too late, they're doing it. So they will have yes. So they will have fiduciary obligations to their clients as a result of that registration. But this is that suggests that anybody who gives them. Like, if you give a dashboard that says, you know, like you know, donut hole, you know, our three inches in size on average, then you have to register as investment advisor. 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 is actually 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 class was just implement it. Like that's your criteria and we will implement it. And they don't call that recommendations at all. Right? So then the last, you know, that means the SEC. More are they more likely to redefine what ESG is? Because yeah and they've included but they forget that there's a g in ESG is It. No no no. Matt. They don't forget that. That's they're well aware of may. You might be right? Right. Like. But that means, every activist is woke because all that activist investor does is That she's 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, Include. So that's how they get them. They basically say, if you give any governance but which case the proxy advisors, there's no way around that, right? Like right. 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 trades 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 Aristocrat is as I said before, they tell the Arista Pension funds, if you rely on proxy, voting advice, you are violating your fiduciary duties unless you all. So do handstands what here's what I 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, that could be on a political structure, whatever. And you just have to shoot, you just have them choose. How is that advice? Well, that's exactly. That's why glass. Lewis is gonna that's why they're doing it exactly that way. So, they're getting out of the advice business. They are going to do entirely you define your own policy, and we just implement it. It's never, it's always been this because they've never forced their clients to vote anyway, like it's just, they're just right. Well, that's why that, that's the big exactly. That's the big problem is that the proxy advisors essentially reflect and channel. Their investor clients. Preferences, right. And very I think you understand, when you go to a Cracker Barrel, the menu is advice. All right? Next, next up and is it which what's more like, likely? All right, musk's we already talked about Tesla AGM. Musk's Mega PayPal package. It's a trillion. Payback, is it more likely to open the floodgates to many musk packages? Are we going to see? Like, we are a couple of them. I saw them already as They didn't meet their goals. So I don't know how much CEOs want them, because you get nothing. If you don't meet outlandish schools, and it seems like some CEOs over-predicted, so, the then, like do but, but in the key, and 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 wave that they can't do that. With the stock price is that they can't do that with the stock price. Correct? And musk shall we say, has a unique ability to at least temporarily rally stock price that is that is the greatest description of me I've ever heard ability to Market. Yeah. Will we see is or is it more likely to push investors to vote against pay everywhere? We already talked about this, but if musk's Mega PayPal package, You know, Mike to your point, the pressure builds you can't vote on. Cheryl the proposals. You can't vote over here, everything looks bad. And now vote against paying against page, just vote against all of it, just make it our policy that no pay like because it's non-binding anyway. Like you just see more of that or do we end say on pay entirely? Is that, is a pressure, is not ending. It's it's it's in the law, so that's it. 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 Pavlov's every three years that are non-binding as up as a default, right? Yeah, I don't think they don't. I mean it's a question of how valuable shareholders find this right and whether they you know that's true is a way of expressing their anger and is there any value in it because there again they're not they're not bound to make any change is based on these but and what we have tracked this year and an alarming increase that what we've seen In AKs. Is these one-time Awards going, their Mega goes right, like outside of the purview of the normal PayPal policy. They're just kind of tacking on. And there's another interesting way of avoiding saying, right? 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 bone. Like you said, sorry that was a one-time thing that was a one-time thing. We're gonna go back to normal next year and then like two years later, they're going to do the same one time thing again. So yeah, I will say this, the unintended consequence potentially of removing shareholder proposals from this world is an increased scrutiny on the issues that were talking about right now, including director performance. It's possible that that scrutiny could go to these to to pay packages. It's possible. You're such a yeah right. I know I mean there could be others before them because the main Well, I mean anything it happened with shoulder proposals, but the main thing that's on the table is eliminating predatory ones, the non-binding ones. So the real thing to see is how much shareholders then move into binding ones, how much they move into? Bylaw, amendments. Exactly. I love that. Starting with bylaws. The permit shareholders to make precatory proposals and then moving on to wherever else, they can go. Wow, you know, my mind. All right, let's let's end on this one. Let's end on this one, which is more likely. The dexit winner. We already know this from Anne. We we think we know, but here are your options. I'm just gonna list them, Nevada, Texas, Delaware or no one, no one wins in Texas. Which one, which one of those fours, the big winner deferring on this one, I'm gonna say it's not Saying this. I'm gonna say this race. I'm gonna say it's Delaware. Delaware, Delaware is still schedule. Yeah, they're still they yeah. They've they've alleviated the concerns and no one because it's a race to the bottom when it comes to everyone. Well, there's that show. Wait a second. Wait a second, the loser. Here you asked to the winners. The loser here is investors to share. Yeah, that's that's true. Yeah. I I think there's I think there's no winners in the end and the long term. That's all I got for my segment to Damien. Do we do, we have any do we have any final? Thoughts. And before, Mike rolls this out and 2026. My real question is, how come we've never done this before? Yeah, this was a very good question. We could, we could do this. We could do this as frequently as we want. Maybe I buy in, we'll do it. We'll do one after after and you know I hate calling it proxy season it. Yeah I know you if this is always been something that bugged me, but again I give an up so maybe after proxy season we'll get back together and see what this is like. What the wrap up sometime in the in the spring? Late spring. All right cool. This has been Both shareholder Primacy and and proxy countdown hosted by and Lipton. Matt miscarry Damien, Rollins. And me Michael Levin, you know, I'm an independent activist, investor answer professor of law, Matt, and Damien founded free flow. Just a couple dude. Media, if you found us under a 95 overpass, right? Real quick. You can find me, Mike me, Mike at the activist investor.com and is at law.com colorado.edu. Matt, and Damien are at free flowed. One word dot LLC, go there and as Matt loves to say, get your data. Our podcast is produced is distributed. Thank you, Matt. Bye free. Float media. Matt is our, the wizard behind the curtain in our, in our, in our podcast production, for the followers, at least of Charlotte, they don't know that match. The match, the guy who makes the trains, run on time here. Thanks for listening and we will see you again in 2027.