Some Freight Line Express shareholders are very dissatisfied with the performance of the firm's current management team.These shareholders want to gain control of the board of directors so they can have the power to oust current management.As a means of gaining control,these shareholders have select candidates for all of the open positions on the firm's board of directors.Since they have insufficient votes to guarantee the election of these individuals,they are contacting other shareholders and asking them to vote with them on this important matter.Of course,the current management team is encouraging shareholders to vote for their candidates for the board.Which one of the following terms is best illustrated by this situation?
A)tender offer
B)proxy contest
C)going-private transaction
D)leveraged buyout
E)consolidation

Question

Quizplus · Accepted Answer

This situation best illustrates a proxy contest, which occurs when a group of shareholders seeks to gain control of a company's board of directors by soliciting the votes of other shareholders. The dissatisfied shareholders have selected candidates to replace the current board members and are seeking to persuade other shareholders to vote with them. The current management team, on the other hand, is seeking to retain control by promoting their own candidates. Tender offer involves a public bid to buy large amounts of securities in a company, going-private transaction involves a company's decision to delist from a public stock exchange and become private, leveraged buyout involves acquiring a company using a significant amount of borrowed money, and consolidation involves the merging of two or more companies into a single entity.

Some Freight Line Express Shareholders Are Very Dissatisfied with the Performance