WEEK 7 SHAREHOLDER ACTIVISM
3. Whether management proposals at the target’s AGM are controversial.
* Understanding a target company's defensive measures and a shareholder's procedural rights is key to any solicitation
* to determine the existence of matters such as limitations or prohibitions on the ability to call meetings, restrictions on shareholder proposals, the existence of a staggered board, the adoption of a poison pill and other limitations that may significantly increase the expense, timing and ultimately determine the success of a proxy contest
* provisions in a company's constituent documents, loan agreements, employment agreements and other material contracts ...view middle of the document...
2. Target controversial propositions from the management
-a review of the company's articles, bylaws and other publicly filed documents allow a shareholder to determine the existence of matters such as limitations or prohibitions on the ability to call meetings, restrictions on shareholder proposals, the existence of a staggered board, the adoption of a poison pill and other limitations that may significantly increase the expense, timing and ultimately determine the success of a proxy contest
3. Propose alternative strategies for the company
* Poor performance is not always a sufficient basis for a change in the board or management;
* a successful proxy solicitation generally must identify specific and recurring faults of current management and, equally as important, give holders a reason to vote for a new agenda.
* While an activist shareholder need not rely on its own credentials, it must be able to present one or more qualified nominees that shareholders believe will bring meaningful change to the company.
4. Seek support from institutional investors
-The target company's shareholder base may also work to the activist shareholder's advantage in instances where potentially sympathetic holders, such as institutional investors, control a significant number of shares. In some instances, Federal securities laws may permit a shareholder to solicit a limited number of other shareholders without the necessity of delivering a proxy statement or conducting a full solicitation.
5. Seek effective means of communicating with shareholders
6. Quietly increase shareholdings of activist block
-Establish a toe hold. This is where entity gathers a large shareholding in the target without being noticed. AN entity must announce to the public that they are a substantial shareholder as soon as they hold 5% or more shares in the company.
WEEK 8 EXECUTIVE COMPENSATION
1) What are the benefits and costs of using executive stock options in his or her remuneration package? What is dilution effect?
Stock options are the right to buy shares at a specified price on or before maturity date typically 10 years.
a) Align managers and shareholders’ long term interest
-The more of the company that the executive and managers own that is the more shares they have the smaller the agency problem.
-they will effectively start becoming the owners of the company and will act more like an owner.
b)Avoid giving managers too much voting power now.
-Equity ownership gives executives massive voting power that is so large that no other shareholder will be able to influence decisions and the managers will be able to control everything including their own reappointment onto the BOD.
- A vesting period usually exists where stock options can only be exercised after a period has elapsed.
c)Cash flow might not be adversely affected.
-In contrast to performance based compensation payable in cash, stock options do not...