Surf Wiki
Save to docs
law

From Surf Wiki (app.surf) — the open knowledge base

Proxy fight

Shareholder contest for company control

Shareholder contest for company control

A proxy fight, proxy contest or proxy battle is an unfriendly contest for control over an organization. The event usually occurs when a corporation's stockholders develop opposition to some aspect of the corporate governance, often focusing on directorial and management positions. Corporate activists may attempt to persuade shareholders to use their proxy votes (i.e., votes by one individual or institution as the authorized representative of another) to install new management for any of a variety of reasons. Shareholders of a public corporation may appoint an agent to attend shareholder meetings and vote on their behalf. That agent is the shareholder's proxy.

In a proxy fight, incumbent directors and management have the odds stacked in their favor over those trying to force the corporate change. These incumbents use various corporate governance tactics to stay in power, including: staggering the boards (i.e., having different election years for different directors), controlling access to the corporation's money, and creating restrictive requirements in the bylaws. As a result, most proxy fights are unsuccessful; except those waged more recently by hedge funds, which are successful more than 60% of the time. However, previous studies have found that proxy fights are positively correlated with an increase in shareholder wealth.****

Examples

  • An acquiring company, frustrated by the takeover defenses of the management, may initiate a proxy fight to install a more compliant management of the target.
  • Internal opponents to an impending takeover (viewing it will cut value or add much risk) may enter into a proxy fight. Such took place within Hewlett-Packard, before Carly Fiorina's management of that company in 2002 took over Compaq.
  • Absent any looming takeover, proxy fights emerge from shareholders unhappy with management, with or without legal and equitable derivative suit grounds, as with Carl Icahn's effort in 2005–06 to oust most of the board of Time Warner.
  • An early history of proxy fighting, detailing such 1950s battles as the fight for control of some of the largest U.S. corporations, including the Bank of America and the New York Central Railroad, can be found in David Karr's 1956 volume, Fight for Control.

Key players

Due to their out-sized influence with many institutional investors, proxy advisors play a key role in many proxy fights. In many cases, the proxy firms end up determining the result of the contest. The Securities Exchange Act of 1934 also gave the Securities and Exchange Commission (SEC) the power to regulate the solicitation of proxies.**** Some of the rules the SEC has since proposed, like the universal proxy, have been controversial because opponents have suggested that they would increase the amount of proxy fights.****

References

References

  1. Klein, Ramseyer, and Bainbridge. Business Associations: Cases and Materials on Agency, Partnerships, and Corporations. (7th Ed.) Foundation Press.
  2. (April 2018). "The Rise of the Working-Class Shareholder: Labor's Last Best Weapon". Harvard University Press.
  3. (2009). "Entrepreneurial Shareholder Activism: Hedge Funds and Other Private Investors". The Journal of Finance.
  4. (2010-01-01). "Private Ordering and the Proxy Access Debate". The Harvard John M. Olin Discussion Paper Series.
  5. [http://www.enquirer.com/editions/2002/03/20/fin_hp_declares_proxy.html HP declares proxy win]
  6. [http://www.dmwmedia.com/news/2006/01/31/frank-biondi-joins-carl-icahn-in-time-warner-proxy-fight Frank Biondi Joins Carl Icahn in Time Warner Proxy Fight] {{webarchive. link. (2010-02-18)
  7. (29 May 2015). "Protecting Shareholders From Activist Proxies".
  8. Hirst, Scott. (2018-04-01). "Universal Proxies". The Harvard Law School Program on Corporate Governance Discussion Paper.
Info: Wikipedia Source

This article was imported from Wikipedia and is available under the Creative Commons Attribution-ShareAlike 4.0 License. Content has been adapted to SurfDoc format. Original contributors can be found on the article history page.

business-terms corporate-law shareholders mergers-and-acquisitions corporate-warfare takeover-defense
Want to explore this topic further?

Ask Mako anything about Proxy fight — get instant answers, deeper analysis, and related topics.

Research with Mako

Free with your Surf account

Content sourced from Wikipedia, available under CC BY-SA 4.0.

This content may have been generated or modified by AI. CloudSurf Software LLC is not responsible for the accuracy, completeness, or reliability of AI-generated content. Always verify important information from primary sources.

Report