While a proxy battle (or proxy fight) seems the name of a fun party game, it is anything but. Proxy battles are fierce wars for control of an organization. Most of the time, these battles are far from congenial and leave a bad taste in the mouth for people who have been dragged into them.
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Proxy battles happen when the shareholders of a corporation disagree with how the organization is run by its directors and management. Strategic activists usually try to convince shareholders to replace management via proxy votes. As it regularly happens, shareholders who initiate proxy battles send an agent (their proxy) to vote in their stead during shareholder meetings.
An acquiring corporation, for example, that may have gotten tired of the resistance by a company they plan to acquire may go through the proxy battle route to put in place a management team that would be more compliant.
In the 1950s, the shareholders and management of the Bank of America and the New York Central Railroad were involved in one of the highest profile proxy battles of the time.
More recently, Hewlett-Packard (HP) experienced a proxy battle within its own management, as it attempted to take over Compaq. Opposition members of the takeover were on the losing end, and Carly Fiorina, head of management, stayed in power. The merger pushed through.
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Image source: Wikipedia.com
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Jon McKee Queen is an expert manager, trader, and investor currently working with private equity firm Amatex Capital. He specializes in project development, company management, corporate finance transactions and fundraisings, commodity trading, and risk quantification. To read more on activist investing, visit this page.
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