Corporate proxy fights and shareholder activism have been around for years. What has changed is the mechanics and strategies behind them. With the impact of social media, activist judges and anti-business regulations, proxy campaigns are just as sophisticated as political campaigns, and should be run like a special election.
Last year, our client, a Fortune 500 company, hired SFI to oversee a proxy fight for a $1.3 billion company where they serve as the Developer and Property Manager. Prior to 2012, our client was sued by activist members and lost. The court gave the members use of the membership roaster, including email addresses, as well as instituted other policies that increased member (activist) involvement in the election process. As a result of these actions, our client nearly lost a seat on the Board in 2012, which would have tilted the balance of power.
In 2013, the client hired SFI to wage a proxy fight to save their Board members from defeat. Defeat was almost certain thanks to an environment where cumulative voting was even higher; where the opposition was better organized and was effectively using social media; where the opposition hired companies to gather proxies on their behalf; and where the opposition rallied behind one candidate, who had previously run, and was able to keep other candidates out of the race.
SFI’s projections showed that the client would lose one seat by as many as 60,000 votes. As a result, the first thing SFI did was a legal and communications assessment to determine how to overcome this shortfall. What we found was a system that was antiquated, did not follow best practices, and in some cases, did not comply with state statutes. The SFI team also found a culture of appeasement and one that did not adhere to boundaries, rules and regulations. Furthermore, the tabulator was ill-prepared to handle a proxy fight of this complexity and magnitude.
The SFI team immediately developed and implemented a comprehensive communications plan, developed in conjunction with the legal team. We knew that without the legal and communications strategies working in tandem, we would not be able to win the proxy fight. We also conducted opposition research, developed key messages and utilized list segmentation and micro-targeting to identify new voters with tailored messages. And lastly, we created a “war-room” where we could respond to the opposition at a moment’s notice.
We worked closely with the client and with three sets of legal counsel. In the end, running a proxy campaign against activist shareholders is like running a special election. On the one hand, you have an energized and passionate opposition that will turn out to vote no matter what; on the other hand, you have happy shareholders who don’t see the need to get involved. In order to win, you have to increase turn out and get the happy or non-interested shareholders to participate in the electoral process.
Our client won the election by more than 10,000 votes. Only after we waged an aggressive communications campaign, did the pendulum swing in the client’s favor and the Board candidates pull ahead. The SFI team changed the outcome by over 70,000 total votes in just five short months.