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September 19, 2024

Shareholder Proposals: Another Proponent Leverages 14a-4

Starboard’s latest effort to push Murdoch-family-controlled News Corp to eliminate its dual-class share structure has been heavily covered in the news. The gist is that Starboard sent a letter to company shareholders and issued a related press release informing shareholders of Starboard’s shareholder proposal for the 2024 annual meeting. The proposal calls for the Board to collapse the company’s dual-class share structure. But that’s not the interesting part! Here are some things that make this situation unique:

– News Corp is widely described as “controlled” by the the Murdoch family. Really, the family’s stake is approximately 14% and it controls 41% of the vote. It may be an uphill battle, but Starboard says “there is a path to achieve majority support.” In fact, a similar 2015 proposal was supported by 90% of non-Murdoch shareholders, representing 49.5% of the vote.

– Starboard’s letter says it plans to file its own proxy statement. Why would Starboard decide to solicit proxies under Rule 14a-4 instead of seeking to include the proposal in the company’s proxy under Rule 14a-8 (especially when they’re not trying to submit multiple proposals)? This article from The Activist Investor speculates:

  • Starboard might have missed the 14a-8 proposal deadline, which was June 6. Perhaps it decided to submit a proposal only a few weeks ago. It could submit a 14a-4 proposal between July 18 and August 17.
  • Starboard avoids the hassles of 14a-8 proposals, including getting through the SEC no-action process.
  • If Starboard solicits proxies itself, then it alone knows how a possibly significant percentage of the shareholder base votes. It will have the proxies, and NWSA won’t. … Starboard may simply force the company to negotiate, somehow, over demands to eliminate dual-class shares, or perhaps other unknown demands.

Since the rule amendments for universal proxy cards, a proponent may include the company’s director slate on its own proxy card along with its proposal(s). That can make it more likely that shareholders return the proponent’s proxy card, and if enough do, the company may have less visibility in tracking and counting votes. The Activist Investor discussed this rule change and strategy in greater detail in a follow-up post.

This is one of the new activist approaches that our panelists will discuss at our 2024 Proxy Disclosure & Executive Compensation Conferences on October 14-15 in San Francisco during our “14a-8 & Shareholder Proposals: The Latest Developments” panel consisting of Davis Polk’s Ning Chiu, Weil’s Howard Dicker and Cooley’s Brad Goldberg. Peruse our agenda to see what else our expert practitioners will cover. You can register here for in-person or virtual attendance.

Meredith Ervine