As impressive as these statistics sound, they omit a key portion of the contemporary story, namely settlement of a threatened
proxy contest by granting the activist shareholder a board seat or two in exchange for the activist promising not to run a
proxy contest.
The final rule therefore increased the likelihood of small firms experiencing
proxy contests or dissident board members by denying a permanent exemption for small firms from Rule 14a-11, by providing for immediate application of Rule 14a-8, and by decreasing the shareholder ownership barrier to proxy access for small firm shareholders.
Another way to anticipate potential issues is to perform self-analyses to understand factors that may make the company the target of a
proxy contest or an attractive takeover candidate.
In a letter to its shareholders, the Orthofix board called Ramius an "opportunistic, activist hedge fund that has engaged in numerous
proxy contests over the past several years." Board members claim Ramius appears to be unable to manage its own affairs, citing published reports that said the company was forced to close four of its funds in the last year.
In its printed rule, the SEC says, "We expect that the reductions in printing and mailing costs and the potential decrease in the costs of
proxy contests to be the most significant sources of economic benefit to investors of the amendments."
Corresponding to the first, the second and the fourth rule amendments, as expected, the occurrence rate as measured by the number of listed companies with
proxy contests divided by the number of listed companies--lowered respectively from 0.593 to 0.338, from 0.338 to 0.120, and from 0.202 to 0.140.
Register has been having a hard time this year, fighting off a board
proxy contest, changing its CEO, and recently warning of lower than expected revenue due to delays rolling out a new domain name registry service.
Kewer noted that company's balance sheet was the strongest it had been in several years, with results achieved despite the "considerable distractions" of the takeover bid that led up to a September
proxy contest. He praised both management and employees for staying "fully focused" during those uncertain times.
The company also settled a potential
proxy contest with founder and former chief executive David Moss, who had been seeking to elect two of the seven directors up for election.
Commenter also contends that First Mariner would have violated the Interlocks Act if a recent
proxy contest challenging Glen Burnie's management by a dissident shareholder that was supported by First Mariner had succeeded.
This rule change has lowered the costs of a potential
proxy contest. Since investors will now have an opportunity to communicate with large stockholders before commencing their solicitation, they should be able to gauge better their prospects for success.(62)
In a
proxy contest, insurgents conduct a campaign to persuade shareholders how to vote on contested issues and board seats.
