The board of Tri-Continental (NYSE:TY) announced that they will hold another shareholder meeting in September to elect directors. In the upcoming election, nominees will only need a plurality of the votes cast in order to be elected.
Strategically, this is a good move by the board. If this had been the requirement for the shareholder meeting in May, the incumbent directors would have been elected with votes from 45% of the outstanding shares vs. Western Investments’ 25%.
I’m in favor of requiring only a plurality of the votes. As we’ve seen in the May election, even when the incumbent board and the dissidents flood shareholders with letters, there are still a lot of shareholders who will not vote. Shareholders might not vote because they can’t decide who to vote for, or don’t care enough to take the time to vote. In these cases I think it is fair to let the other shareholders decide the fund’s fate.
However, the board is trying to take this too far with this proposal:
Tri-Continental also announced that its Board has approved an amendment to the Corporation's Charter to reduce the quorum requirement at a meeting of Stockholders from a majority of the votes entitled to be cast to one-third of the votes entitled to be cast, unless a higher percentage is specified in the Bylaws of the Corporation. The amendment to the Charter is subject to Stockholder approval at the Special Meeting.
While I understand that many shareholders will not vote, I think at least 50% of the shares outstanding should be voted in order to achieve a quorum. I would not be comfortable with a fund’s future being determined by only one-third of the shares eligible to be voted. My guess is that the board is worried that Western Investments’ will solicit proxies again, and then might not vote the proxies in an attempt to prevent a quorum from being achieved. But the board should find another way to achieve a quorum other than lowering the requirement to a very low level.
TY 1-yr chart: