Five ways to lose a proxy fight

A proxy fight is akin to a political campaign and getting the message out and the votes in are tantamount to shoring up a win, says Stuart Morrow, senior partner at the law firm Davis LLP in Vancouver, who specializes in disputed shareholder meetings and proxy campaigns.

"Proxy contests are ultimately won and lost at the ballot box:Whoever has the most shareholder support gets the prize at the end of the day.

"It is very much an exercise in persuading shareholders that the dissidents have a more effective plan for maximizing shareholder value than do incumbent management."

Or visa-versa.

Mr. Morrow wrote a paper outlining the fine points of conduct and related case law surrounding proxy contests and shareholder meetings and offers up the following five, sure-fire ways that can see an otherwise worthy proxy challenge go off the rails:

1. Fail to sell your vision and message A message needs to be clear, forward-thinking in its outlook and disseminated to as many shareholders as possible.

2. Lack of financial resources The formalities associated with a proxy battle can be very expensive, Mr. Morrow said. Parties rarely want a protracted battle so most proxy campaigns are settled prior to the shareholders' meeting, when the parties either reach a compromise or a negotiated settlement.

3. Underes timate your opponent Never underestimate the dissidents and don't take major shareholder loyalty for granted. Your opponents may be more credible than you anticipate. Parties rarely want a protracted battle so most proxy campaigns are settled prior to the shareholders' meeting, when the parties either reach a compromise or a negotiated settlement.

4. Distress, distraction and disorganization A sudden challenge to the incumbent management and board can result in shock, panic and an inability to mount a rapid and credible counter-attack, contributing to a market perception of weakness, adding momentum to the dissidents' campaign.

5 . Ignore the technical details The devil is in the detail. Slip up and you can be on the wrong end of a proxy fight. Count on rigorous scrutiny of technical details related to your campaign and shareholders' meeting, including the overlay of applicable corporate and securities laws, stock exchange rules, company bylaws, articles. Overlook one little detail and you will create a compliance minefield for opposing counsel to exploit and undermine your campaign.