AOL's stock fell 6% Thursday after shareholders defied an activist's attempt to unseat three directors by voting to re-elect all eight members of AOL's board, including CEO Tim Armstrong.
"On behalf of AOL's Board and management team, we want to thank our stockholders for their strong support throughout this process," said AOL in a statement.
One of AOL's biggest investors, activist hedge fund Starboard Value, was pushing shareholders to elect the new directors to ensure that AOL stockholders "are appropriate represented in the boardroom." Starboard owns a 5% stake in AOL.
In a shareholder proposal included in AOL's proxy statement in April, Starboard CEO Jeff Smith, argued that "AOL has poor corporate governance given the combined role of chairman and CEO as well as certain potential conflicts of interest regarding AOL's heavy investment in its money-losing Patch business."
Armstrong fought back in a letter to shareholders last month. The CEO, who took the helm in 2009, highlighted the company's strong-performing stock and refuted Starboard's claims, calling the hedge fund's campaign "short-sighted" and "misleading."
"It has become clear to us that Starboard's and Mr. Smith's increasingly vitriolic campaign to secure board representation and foist Starboard's misguided strategy on AOL is not designed to benefit all of AOL's stockholders generally, but to establish Mr. Smith's bona fides as an 'activist' investor and to garner him the publicity and prestige of a board seat at AOL," said Armstrong in the letter.>
Though AOL won the proxy fight, the company said it intends "to be responsive to the messages we heard from our investors and will continue our plans to pursue adding two new independent directors to the Board, who we believe will add additional expertise and relevant perspectives to further enhance the strength of our Board."
Smith said Starboard is "thankful" for the support it got from shareholders in its effort.
"For Starboard, we measure success by enhancing value for all shareholders, thereby producing returns for our investors," he said in a statement. "AOL adopted many of our suggestions, taking AOL stock from near an all-time low to near an all-time high."
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