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John C. Coffee Jr.

In 2016, Lazard counted some 149 campaigns initiated by activist shareholders to obtain board representation and also found that these campaigns netted a record 131 board seats in that year.[1] But, 95 percent of these seats were the result of settlement negotiations, not proxy contests.[2] (Indeed, in the relatively few cases that did go to a shareholder vote, management generally won[3]). This suggests that corporate managements have become highly risk averse and will do much to appease activist funds. They have good reason to do so, because other studies have shown that the majority of CEOs depart within two years of an activist going on the board.[4] A defeat in a hostile proxy fight (even if only for one or two directors) means that the CEO has been humiliated and probably is on his way out. Hence, appeasement is the new norm.

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