A proxy fight is when shareholders use their proxy votes to take control of a company, often in a corporate takeover attempt or if they believe the company is being mismanaged. Board members may use tactics to prolong the fight, and the public may follow the battle if they have a personal interest.
A proxy fight is a situation where people attempt to take control of a company by bringing together shareholders and using their proxy votes in a blockade. Proxy votes allow shareholders to vote on matters important to the company, with shareholders using an authorized agent known as a proxy to cast votes on their behalf. When shareholders work together, the power of their votes increases and can sometimes effect change in a company.
More classically, a proxy fight is used in a corporate takeover attempt. If Company A wishes to acquire Company B, Company A’s agents could try to convince Company B’s shareholders that it is in their best interest to oust the current company board and elect new board members. These new board members, of course, would be carefully screened to ensure they would support the takeover.
Shareholders can also use a proxy fight if they believe a company is being mismanaged. In this case, they agree to work together as a team to remove board members in the interest of finding new board members who will set better policies for the company. Companies that fail to meet the demands of changing times may find themselves subject to proxy infighting, and proxy infighting has also been used to push companies to make certain policy decisions.
Most companies don’t welcome proxy fights. Board members usually react in a variety of ways in an attempt to thwart the attempted proxy fight. For example, they can organize staggered elections, ensuring that only one council member can be replaced each year, thus considerably prolonging the proxy struggle. They can also use day-to-day control of the company to solidify their position, in hopes of holding out long enough that they can drop the proxy fight.
These corporate battles often make headlines when they involve big companies, because the public sometimes has an interest in the fate of big companies. While members of the public cannot participate in proxy fights unless they are stockholders, they may follow the twists and turns of a corporate takeover out of general interest or because they believe they could be personally affected. For example, users of certain software may feel threatened when another software company threatens to take over the company that makes their favorite products.
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