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Cardozo Journal of Conflict Resolution

Abstract

Activist investors have the capacity to play a commanding role in a company after they invest in it. Sometimes, these investors are dissatisfied with some aspect of the company, from its structuring, to its earnings, or future expansion or investment plans. In very few instances does an activist approach a company and have the opportunity to be heard by the board in a non-confrontational setting. More commonly, the activist will wage a proxy battle to be acknowledged. The goal of this battle usually aims at removing current board members and replacing them with individuals of the investor's choice, who will subsequently act as the investor sees fit. The targeted company tends to push back, almost instinctually. The activist investor must convince other shareholders to back him in his endeavor. Other shareholders will then allow the activist to use their votes via the proxy system to create change. This tends to play out in very public battles. The key to a successful proxy battle hinges on creating persuasive messages for other shareholders through the media. Often, papers are sent from the investor's attorney directly to the company before there has been no opportunity to have a face-to-face meeting and truly discuss points of concern. Perhaps the opportunity to have a true meeting of the minds would eliminate the need for a battle of any sort and companies and investors could move forward more efficiently.

Disciplines

Dispute Resolution and Arbitration | Law | Securities Law

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