In light of the unprecedented economic decline of 2008, Boards of Directors of public companies have found themselves in uncharted territory. Companies are facing intense economic pressures on their business, stock prices are at historic lows and the shareholders of many companies, facing liquidity challenges of their own, are pressuring directors to focus on short-term returns. At the same time, hostile M&A has reached record levels. While general M&A activity was down 37% through September 30, 2008, hostile M&A activity increased from $97 billion in 2007 to $211 billion during this period. Additionally, shareholder activism is at an all-time high. During 2008, dissident shareholders conducted 56 proxy contests (as opposed to 46 in 2007 and 31 in 2006). Moreover, dissident shareholders were successful in obtaining at least one Board seat in over 70% of contested situations in 2008. These statistics reflect only public contests. Many other contests are resolved quietly, with corporations acceding to at least some of the demands of activist shareholders in an effort to avoid the potential distractions and costs associated with a proxy contest. [Read more →]