Activist Shareholder Settlement Agreement

Companies often find that improving their corporate governance is welcomed by institutional shareholders and helps minimize the risk that the company will be targeted by corporate governance oversight groups and other activist organizations as the subject of a shareholder proposal to improve its governance in the future. Better governance can also improve the company`s image with independent proxy advisory service providers such as risk-Metrics Group and Glass, Lewis & Co. and prevent the company`s directors from obtaining recommendations from these organizations at future annual meetings. When should the company be required to hold the general meeting? If the company does not send the nominees of the activist shareholder to the company`s board of directors at the same time as the execution of the settlement agreement, the activist shareholder may wish for the annual meeting to be held as soon as possible so that its nominees can be elected to the board of directors as soon as possible. Even if the nominees of the activist shareholder are appointed to the company`s board of directors prior to the general meeting, the activist shareholder may still have an interest in the company holding the general meeting as soon as possible, or at least on an agreed date. This will likely be acceptable to the company`s management team, given that the proxy contest is now behind them and therefore they no longer have the option to postpone the annual meeting for strategic reasons. How does the activist shareholder prevent the company from excluding its nominees from the board of directors procedure? An activist shareholder may be concerned that board or committee meetings may be held or organized without properly informing the activist`s nominees, so that they can prepare for, participate in, and participate in such meetings. To avoid this, the company could be asked to agree, in the transaction agreement, that each of the incumbent directors and each member of the company`s senior management team refrain from scheduling meetings of the board of directors and the committee, without first meeting with the activist shareholder and adequately informing him. In addition, the activist shareholder may wish that the company agree to make reasonable efforts to plan and hold meetings of the board of directors and the committee to reflect the schedule of each member of the board of directors and the committee.

A conciliation agreement cannot achieve lasting peace. Many activist situations, resolved by a hasty agreement, degenerated into a public struggle at the end of the status quo. In other words, many comparisons ultimately fail to achieve the board`s primary goal of preventing a public proxy struggle. As shareholder activism has increased, boards have stepped up their efforts to prepare for and respond more effectively to activist campaigns. Some of these measures are undoubtedly positive – boards of directors are implementing more effective programs for the work of shareholders, revising their governance structures and strategic plans, and sometimes even as a preventive measure, they take up activists` proposals. However, in many cases, boards decide to challenge activists and defend themselves more aggressively. In each of these cases, the ultimate goal of the board of directors is not to get in constructive contact with activists, but to keep them away from the meeting room and minimize their influence. .

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