A proxy fight or proxy battle is an event that may occur 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 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 agent to attend shareholder meetings and vote on their behalf. That agent is the shareholder's proxy.^[1]

In a proxy fight, incumbent directors and management have the odds stacked in their favor over those trying to force the corporate change. 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. However, it has been recently noted that proxy fights waged by hedge funds are successful more than 60% of the time.^[2]

Examples[link]

An acquiring company, frustrated by the takeover defenses of the management, may initiate a proxy fight to install a more compliant management of the target.

Stockholder dissidents opposed to an impending takeover in the view that it will dilute value may also use a proxy fight to stop it. An example of a proxy fight took place within Hewlett-Packard, when the management of that company sought to take over Compaq. Opponents of the Compaq takeover lost the fight. The management, under Carly Fiorina, remained in place, and the merger went ahead.^[3]

In the absence of any looming takeover, proxy fights can come about because dissidents are unhappy with management, as with Carl Icahn's effort in 2005-2006 to oust a majority of the board of Time Warner.^[4]

An early history of proxy fighting, detailing such 1950s battles as the fight for control of some of America's largest corporations, including the Bank of America and the New York Central Railroad, can be found in David Karr's 1956 volume, Fight for Control.

References[link]

External links[link]

• Proxy fights heat up as markets tank
• Capital markets are proxy-fight friendly: Part II
• Icahn launches Yahoo proxy fight, may boost stake by $2.5 billion

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Bruce R. Berkowitz is an equity fund manager and registered investment adviser. ^[1] Berkowitz founded Fairholme Capital Management in 1997 and was formerly a senior portfolio manager at Lehman Brothers Holdings and a managing director of Smith Barney. Berkowitz was named 2009 Domestic-Stock Fund Manager of the Year and Domestic-Stock Fund Manager of the Decade by Morningstar, Inc.^[2]. He graduated with a bachelors degree in economics, cum laude, from the University of Massachusetts Amherst in 1980.

Berkowitz lives in Coral Gables, Florida.^[3] In late 2010 it was announced that Berkowitz had joined the board of directors of the St. Joe Company. ^[4]

References[link]

External links[link]

• Fairholme Funds
• Fairholme Capital Management

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