Breakingviews: New shareholder ballots win vote of confidence

The new era of U.S. corporate elections just secured a ringing endorsement. Shareholders at $5.2 billion Apartment Investment and Management, a real estate investment trust known as Aimco, became the first to take advantage of a U.S. Securities and Exchange Commission rule known as universal proxy, giving them power to vote for both company-supported board candidates and those nominated by dissidents. It’s early, but this first result suggests new incentives for compromise as well as greater power for influential advisory firms such as Institutional Shareholder Services.

Pushy investor Land & Buildings, led by Jonathan Litt, says poor governance is why Aimco trades at a discount to its net asset value. The fund sought to replace two directors. ISS – and ultimately the company’s shareholders – backed only one of them, Jim Sullivan, and ousted incumbent Michael Stein. Before the newly enacted universal proxy cards, they would have been forced to choose either the activist’s entire slate or the company’s.

It’s impossible to know whether Land & Buildings would have secured an additional seat or none at all under the old rules, but even though Litt has won settlements with companies in the past he only has been victorious at the ballot once before. ISS also was able to provide a more selective recommendation to big fund managers that follow its advice. Shareholders, meanwhile, used the opportunity to send a message without pushing too hard. The result could mean boards will be more willing to strike deals with unhappy investors rather than endure a public fight. For the new proxy battle regime, it’s a vote of confidence.

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