How can activist investors get board seats and lead proxy fights with less than 50% of the shareholder votes?
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Publicly listed companies have an elected board of directors. The board is elected by the shareholders, generally each share you own equals one vote. At the annual meeting, board members will be elected and other matters voted on. The board will usually list a slate of people running for directors and will give their opinion on how to vote for other matters.
A proxy fight happens when someone wants to challenge the board on something. It may be to elect a different group of board members or it may be to vote against the board’s opinion on some of the other matters. The challenger will send paperwork to the stockholders asking them to either vote the way the challenger wants, or send a legal paper to the challenger that will allow the challenger to vote their shares.
Some proxy fights, the challenger succeeds and some they lose. There are especially common when someone is trying to buy the business, or prevent a sale of the business.
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