Do shareholder proxy fights ever end well?

April 8, 2016 10:00 AM

The company I work for is involved in a proxy fight with an activist investor. I love my job and my company is doing just fine thank you very much without this interloper's opinions. The investor's agenda is highly short-sighted and I'm concerned it will harm our long-term competitiveness. If the investor manages to win this proxy fight... does that *ever* end well for the employees? Or should I start polishing my resume?
posted by klao to Work & Money (10 answers total)

Absolutely no way to tell. You could end up with no meaningful changes whatsoever, or you could be gutted. Usually the result is closer to the former than the latter, but it's not predictable.
posted by praemunire at 10:07 AM on April 8, 2016 [2 favorites]

There is almost always some kind of document where the activist lays out their plans. Read that and figure out if that impacts you.

also see if ISS is supporting the activist. If they aren't they probably won't win.

There are examples of activist winning and being good for some employees, depending on what they want and why.
posted by JPD at 10:11 AM on April 8, 2016 [2 favorites]

I suppose the question is "end well for whom?"

When Frank Lorenzo took over Continental Airlines in the early 1980s, he cut labor costs a lot, and the company, which had been troubled, prospered. So for customers and for the post-takeover stockholders, it ended well. For the employees who suffered pay cuts, maybe it did not end well.
posted by SemiSalt at 10:46 AM on April 8, 2016 [1 favorite]

Best answer: Also, an investor's "winning" the fight doesn't mean the automatic implementation of whatever plan he's put forth. A proxy fight of this kind can be a referendum on a policy issue, but most often it's an indirect referendum: shareholders are voting on board members, not literally on a specific plan. Even if the investor gets his three seats on the board or whatever, unless he gets an actual majority of the seats, he can't just put through his plan as he pleases. And even with a majority, he may find himself needing to placate certain interests, both inside and outside the company. (For example, he might have to negotiate financing for his grand plan, which requires appeasing potential lenders and, sometimes, existing creditors.) So, you know, be prepared, but it may be a while before you see fully how matters shake out, even if the election is tomorrow.
posted by praemunire at 10:47 AM on April 8, 2016

You should always be polishing your resume.
posted by Bruce H. at 11:17 AM on April 8, 2016 [2 favorites]

Darden theoretically has been doing better (as measured by stock performance) since its board was ousted by an activist investor.
posted by Candleman at 12:26 PM on April 8, 2016 [1 favorite]

Realistically if an activist wins a proxy fight he's getting what he wants. Simply because the cost is such that you won't do it if you don't substantially control the board if successful.
posted by JPD at 1:50 PM on April 8, 2016 [1 favorite]

But sometimes you can't even control the board based on one proxy fight. E.g., staggered board. And even grand business schemes put forth by incumbents usually end up being modified to some degree in the process of execution. I'm just saying that those 200-page PPTs about breadsticks and such may not get fully implemented and you might not want to quit your job because one slide mentions that your division might be reorganized.
posted by praemunire at 2:09 PM on April 8, 2016 [1 favorite]

You usually don't proxy a staggered board for precisely that reason. Hence the existence of the staggered board.

Which isn't too say your second point isn't correct.
posted by JPD at 5:29 PM on April 8, 2016

A public company takes minimum 18 months to do anything. If something bad's coming down the pipe, you've got a long time to look for alternatives. Don't sweat it.
posted by miyabo at 1:31 PM on April 9, 2016