Chemical Mines has 5,000 shareholders and is preparing to elect two new board members. You do not own enough shares to personally control the elections but are determined to oust the current leadership. Likewise, no other single shareholder owns sufficient shares to personally control the outcome of the election. Which one of the following is the most likely outcome of this situation given that some shareholders are happy with the existing management?
A) Negotiated settlement where each side is granted control over one of the open seats
B) Protracted legal battle over control of the board of directors
C) Arbitrated settlement where the arbitrator determines who will be elected to the board
D) Control of the board decided without your influence
E) Proxy fight for control of the board

Question

Quizplus · Accepted Answer

Since no single shareholder owns enough shares to control the election, the most likely outcome is a proxy fight for control of the board. This involves each side campaigning to persuade other shareholders to vote for their chosen candidates through the use of proxy statements. A negotiated settlement or an arbitrator determining the outcome is unlikely if some shareholders are happy with the existing management, and a protracted legal battle is also unlikely as it is time-consuming and expensive for all parties involved. Therefore, the most realistic option for a change in the board's composition is a proxy fight.

Chemical Mines Has 5,000 Shareholders and Is Preparing to Elect