Editing Proxy fight

{{Short description|Shareholder contest for company control}}
{{distinguish|proxy war}}
A '''proxy fight''', '''proxy contest''' or '''proxy battle''' is an unfriendly contest for control over an organization. The event usually occurs when a corporation's stockholders develop opposition to some aspect of the corporate governance, often focusing on directorial and management positions. Corporate activists may attempt to persuade shareholders to use their [[Proxy voting|proxy votes]] (i.e., votes by one individual or institution as the authorized representative of another) to install new management for any of a variety of reasons. Shareholders of a public corporation may appoint an [[Proxy firm|agent]] to attend shareholder meetings and vote on their behalf. That agent is the shareholder's proxy.<ref>Klein, Ramseyer, and Bainbridge. Business Associations: Cases and Materials on Agency, Partnerships, and Corporations. (7th Ed.) Foundation Press.</ref>

In a proxy fight, [[Incumbent#In business|incumbent]] directors and management have the odds stacked in their favor over those trying to force the corporate change.<ref>{{cite book |last1=Webber |first1=David H. |author-link=David H. Webber |title=The Rise of the Working-Class Shareholder: Labor's Last Best Weapon |date=April 2018 |publisher=Harvard University Press |isbn=978-0-674-91946-4 |pages=46–47 |url=https://www.degruyter.com/viewbooktoc/product/511375 |access-date=15 November 2019 |url-access=subscription}}</ref> These incumbents use various corporate governance tactics to stay in power, including: staggering the boards (i.e., having different election years for different directors), controlling access to the corporation's money, and creating restrictive requirements in the [[bylaws]]. As a result, most proxy fights are unsuccessful; except those waged more recently by [[hedge fund]]s, which are successful more than 60% of the time.<ref>{{cite journal | url=http://onlinelibrary.wiley.com/doi/10.1111/j.1540-6261.2008.01432.x/full.html | doi=10.1111/j.1540-6261.2008.01432.x | title=Entrepreneurial Shareholder Activism: Hedge Funds and Other Private Investors | date=2009 | last1=Klein | first1=April | last2=Zur | first2=Emanuel | journal=The Journal of Finance | volume=64 | pages=187–229 }}</ref> However, previous studies have found that proxy fights are positively correlated with an increase in shareholder wealth.<ref>{{Cite journal|last1=Hirst|first1=Scott|last2=Bebchuk|first2=Lucian|date=2010-01-01|title=Private Ordering and the Proxy Access Debate|url=https://scholarship.law.bu.edu/faculty_scholarship/338|journal=The Harvard John M. Olin Discussion Paper Series|number=653}}</ref>'''{{rp|8}}'''

==Examples==
*An acquiring company, frustrated by the [[Takeover#Tactics against hostile takeover|takeover defense]]s of the management, may initiate a proxy fight to install a more compliant management of the target.
*Internal opponents to an impending takeover (viewing it will cut value or add much risk) may enter into a proxy fight. Such took place within [[Hewlett-Packard]], before [[Carly Fiorina]]'s management of that company in 2002 took over [[Compaq]].<ref>[http://www.enquirer.com/editions/2002/03/20/fin_hp_declares_proxy.html HP declares proxy win]</ref>
*Absent any looming takeover, proxy fights emerge from shareholders unhappy with management, with or without legal and equitable [[derivative suit]] grounds, as with [[Carl Icahn]]'s effort in 2005&ndash;06 to oust most of the board of [[Time Warner]].<ref>[http://www.dmwmedia.com/news/2006/01/31/frank-biondi-joins-carl-icahn-in-time-warner-proxy-fight Frank Biondi Joins Carl Icahn in Time Warner Proxy Fight] {{webarchive|url=https://web.archive.org/web/20100218183834/http://dmwmedia.com/news/2006/01/31/frank-biondi-joins-carl-icahn-in-time-warner-proxy-fight |date=2010-02-18 }}</ref>
*An early history of proxy fighting, detailing such 1950s battles as the fight for control of some of the largest U.S. corporations, including the [[Bank of America]] and the [[New York Central Railroad]], can be found in [[David Karr]]'s 1956 volume, ''Fight for Control''.

==Key players==
Due to their out-sized influence with many institutional investors, [[proxy advisor]]s play a key role in many proxy fights. In many cases, the proxy firms end up determining the result of the contest.<ref>{{cite news |title=Protecting Shareholders From Activist Proxies |website=[[The Wall Street Journal]] |date=29 May 2015 |archive-url=https://web.archive.org/web/20221109175643/https://www.wsj.com/articles/protecting-shareholders-from-activist-proxies-1432860067 |archive-date=2022-11-09 |url-status=live |url=https://www.wsj.com/articles/protecting-shareholders-from-activist-proxies-1432860067}}</ref> The Securities Exchange Act of 1934 also gave the [[U.S. Securities and Exchange Commission|Securities and Exchange Commission]] (SEC) the power to regulate the solicitation of proxies.<ref name=":1">{{Cite journal|last=Hirst|first=Scott|date=2018-04-01|title=Universal Proxies|url=https://scholarship.law.bu.edu/faculty_scholarship/344|journal=The Harvard Law School Program on Corporate Governance Discussion Paper|number=2016–11}}</ref>'''{{rp|4}}''' Some of the rules the SEC has since proposed, like the universal proxy, have been controversial because opponents have suggested that they would increase the amount of proxy fights.<ref name=":1" />'''{{rp|61}}'''

== See also ==

* [[Proxy statement]]

==References==
{{reflist}}{{corporate finance and investment banking}}

[[Category:Business terms]]
[[Category:Corporate law]]
[[Category:Shareholders]]
[[Category:Mergers and acquisitions]]
[[Category:Corporate warfare]]
[[Category:Takeover defense]]