Despite what readers might anticipate in light of the extensive media coverage of proxy fight votes, more contests settle than actually go to a vote. So far in 2006, 31 of 51 selected fights (61%) culminated in a settlement, thereby avoiding a harsh "winner vs. loser" epitaph.

Settlements between issuers and activist shareholders are typical of the (sometimes last minute) compromise a target company will "choose" when it becomes clear that it will lose a proxy fight. With a settlement, the issuer may be able to extract some concessions from the dissidents (usually a board seat or two) that it was unlikely to have obtained if the original slates had gone to a vote. Moreover, the company is able to save face by not officially "losing" the contest (at least for posterity). In contrast, the dissidents often are able to get everything they asked for and appear reasonable in the bargain, which can only enhance their options in future proxy fight negotiations.

The fact that some companies wait until the eleventh hour to settle indicates: (i) some proxy fights are difficult to handicap, and/or (ii) some companies have a misguided sense of the level of support they will receive from the shareholder base. In many cases, it may be a wiser course to settle with the dissidents at an earlier stage in order to avoid the costly distraction of a fight that is very much in the public eye. Many of the companies who have opted to settle this year have chosen such a course, thereby avoiding the embarrassment of a meeting day loss.

We welcome your thoughts on this year's settlement fever.