Proxy Fight
Candlefocus EditorWhen a proxy fight begins, a solicitation of proxies will be sent out—usually by the person or group behind the battle—asking shareholders to side with a certain party. This document includes a variety of information regarding the situation at hand, including the reason for the attempt to make executive or board-level changes. Once the voting period begins, all shareholders have the opportunity to cast their vote for the proposed change. Generally speaking, a quorum of 50% plus one of the total share votes is necessary for the movement to become successful.
The cost of taking part in a proxy fight can be expensive and oftentimes the initiating party must show evidence that they have the cash to finance their campaign. Depending on the situation, the party behind the move may end up paying shareholders to vote in their favor. Additionally, it is increasingly more common to hire share solicitation firms to assist in the process.
Regardless of the outcome of such a hostile act, proxy fights are part of the cost of doing business in the corporate world. There have been occasions in which the entire process has become lengthy and expensive, resulting in the losing party threatening a suit. These battles, albeit controversial, are used as one method of controlling a company’s power structure, especially when other methods have been unsuccessful over the long-term.