Disney and Tesla’s board seat battles are just the beginning. An SEC rule change could put more directors at risk

January 13, 2023, 12:52 PM UTC
Elon Musk smiles and points to an unseen person.
A Tesla investor plans to use the new universal proxy card to land a board seat.
Patrick Pleul—Getty Images

A new Securities and Exchange Commission rule that sounds innocuous enough might drive profound changes in how companies and boards conduct their business.

We may soon see the rule’s effect in high-profile board seat battles, like that brewing at Disney, where activist investor Nelson Peltz is making a play to join the board, and at Tesla, where the fed-up investor Ross Gerber vowed to do the same. It might also fan the flames of both the ESG and anti-ESG movements.

Last fall, the SEC began requiring companies to use a universal proxy card for all contested board elections. “Before, there were two proxy cards, the company card and the investor card, and you had to vote for the whole slate,” Rusty O’Kelley, a senior advisor and governance expert at Russell Reynolds, explains. “If there were three people on the company card, you had to vote for all three. There was no ability to split your votes and say, ‘I like these people from the company, but that one from the activist.’” Now, all nominees appear on one slate, giving voters the option to pick and choose.

On its own, the change might not sound like a big deal. But, in practice, it will make running—and winning—proxy campaigns for board seats significantly cheaper and easier, likely encouraging more activists to launch bids.

O’Kelley and Rich Fields, another governance expert at Russell Reynolds, point out in a recent white paper that this requirement arrives when traditional shareholder activism is hopping and institutional investors are wielding their influence. In a proxy contest, the consultants say boards should expect to feel intense new pressures from all sides—from both the Peltz’s of the world and cause-based activists, like environmentalists or unionists, and institutional investors and proxy advisors. All will be examining board composition and scanning for weaknesses in individual directors. They’ll ask: Does the board have the right mix of skills for the company’s current needs? Is it diverse enough? Are some directors serving on too many boards at once? Have members with long tenures overstayed their welcome?

“The universal proxy creates a new sense of urgency. Boards need to encourage lower performing directors to leave the board before activists do it for them,” a leader at a large institutional investor told O’Kelley and Fields.

Boards need to take stock, even if they aren’t expecting a proxy fight, O’Kelley says. “Companies need to ensure that their disclosure really reflects why that director is on that board and the unique skills and experiences they’re going to bring relevant to the current strategy.”

Companies should expect to feel the new rule’s effect in the upcoming proxy season. In time, the culture of contested board elections could change now that individual directors will be measured against each other. As a trio of attorneys for Sidley Austin write in a National Association of Corporate Directors blog post, “There will be a personalization of proxy contests like never seen before.”

In other words, expect drama.

Lila MacLellan


“Peltz came out and the things he’s hammering on are really reasonable: succession planning, maybe a bad merger or acquisition, focusing on streaming and the profitability of streaming. Everybody's like, ‘Yeah, those are reasonable things to say.’ It's not like he came out and said, ‘Let's break Disney into three different companies.’…I've owned Disney shares since ‘96, and this guy's reasonable.”

—Jason Schloetzer, a professor at Georgetown University’s McDonough School of Business, on activist investor Nelson Peltz’s push to join Disney's board

On the Agenda

👓 Read: Mandating an office return? Then prepare for the four horsemen of forced in-office policies: Resistance, attrition, quiet quitting, and a drop in diversity.

🎧 Listen: It’s not only the C-suite that needs a robust succession plan. Last spring, The Governance Guys podcast shared tips to get board succession right.

📖 Bookmark: Workers have more agency, A.I. is fueling a human performance revolution, and anyone can be a leader in a new boundaryless world. These are three top insights in Deloitte’s human capital trends report.   


Stephanie McMahon stepped down as co-CEO and chairwoman of WWE following her father's controversial return to the board last week. Meanwhile, her father, Vince McMahon, brought two former presidents with him and triggered other hasty departures. 

Zoom appointed Cindy Hoots, chief digital officer and CIO of AstraZeneca, to its board of directors. Douglas Duncan is retiring from the Benchmark board, and Douglas Britt, CEO of Boyd Corporation, is joining it. Diane Offereins, president of payment services at Discover Financial Services, was tapped to become an independent director at Flywire; Jo Natauri and Yvonne Hao have resigned. DISH Wireless appointed Stephen Bye, chief commercial officer at the company and soon-to-be head of the connectivity division at Ziff Davis, to its board. American Healthcare REIT welcomed two new directors, Marvin O'Quinn, chief operating officer of CommonSpirit Health, and Valerie Richardson, former VP of real estate for The Container Store. The Federal Reserve named the chairs and deputy chairs at its 12 Federal Reserve banks and reiterated its commitment to advancing diversity at the board level.

In Brief

- Female founders rode a wave of investing in direct-to-consumer startups. Now the pendulum is swinging back to tech and B2B opportunities, threatening women’s progress in attracting VC funding.

- The world’s richest man, Bernard Arnault, selected his daughter to head the Dior fashion house, ending a long succession battle. 

- Mattel’s new Barbie Chief Sustainability Officer speaks to a trend in that profession.

- Saks’s CEO has theories about why his customers haven’t stopped spending despite recession talk: The wealthy have diversified their portfolios, he says, and once you go luxe, it’s hard to go back.

- Companies use individual-level solutions—think mental health apps and self-awareness coaching—for systemic problems. A professor of organizational psychology explains how to break that habit.

Editor’s Pick 

Boards that don’t already have automation on their agendas should assume that will change. And soon. For an update on how far robots have come, check out this fun read from Bloomberg about the quest to build an automated pizza-making machine, a goal set by a surprising number of Silicon Valley startups. Mushrooms, we learn, will not be governed by code, and explosions are a regular hazard. 

Here’s a snippet:

“Consistency has been one of the greatest challenges for Stellar. Arik Jenkins, a former automation engineer at SpaceX, joined Stellar in 2020 and quickly became exposed to the darkest fear from his rocket-making days: Things kept blowing up. Under the pressure of the cooking process, the dough overinflated and then burst. This happened again and again. Hardened fragments, shrinking and then blackening, dotted the walls and ceiling of the 900F oven.

The explosions stemmed from air pockets that formed unpredictably and grew so large that the sauce and cheese slid off them. Desirable in some styles of pizza, puffy crusts didn’t work for Stellar. The resulting bare sections looked ugly, and the displaced ingredients piled up in other parts of the pie. Engineers had to lurk outside the oven’s windows, armed with a dinner knife tied to a stick, ready to throw open the door and pierce any emerging bubbles.”

Read the rest here, and have a slice this weekend.

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