Proxy contests are expensive and time consuming partially because they are littered with inane technicalities. Technicalities that seem to exist solely to exasperate the shareholder. In this post, we evaluate a few to illustrate the absurd steps an entrenched board takes - using your money as a shareholder.
The Shareholder List
In a proxy contest, the dissident investor contacts shareholders using a list provided by the target company (under state law or federal proxy rules). Typically the list is sold to the investor at an outrageously high price. There are the obvious costs of assembling it, but why must investors spend up to tens of thousands of dollars to receive the list? There is no valid reason I have heard that merits the high cost for a list that is really just an electronic file. It is a completely senseless charge and one that I believe is exploited by companies as a nuisance to dissident shareholders.
The investor is left with a Hobson's choice - he can pay the company its fee or hire a lawyer to challenge the excessive cost. This is a game companies can play since the cost of pursuing such a lawsuit would be far in excess of the inflated cost that it has demanded.
