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Activist Investing Today: Goldstein Targets Fund Bylaws

Published: May 7th, 2020
Activist investor Phil Goldstein of Bulldog Investors believes a recent SEC decision upholding closed-end fund Dividend & Income's right to ignore a shareholder proposal poses a broader threat to investor rights.

Activist investor Phil Goldstein, who runs Bulldog Investors LLC, believes a recent Securities and Exchange Commission decision to uphold a closed-end fund’s right to ignore a shareholder proposal poses a broader threat to investor rights.

Goldstein, who has been an activist investor for roughly 30 years, spoke on The Deal’s Activist Investing Today podcast about potential fallout from the decision regarding Dividend & Income Fund.

At issue is a provision in the bylaws set up by Dividend & Income that requires the support of 75% of shares outstanding to elect a trustee in a contested election at the Delaware-domiciled firm. The unusually high threshold makes it virtually impossible for a dissident or incumbent to win a board election at Dividend & Income.

Seeking to counter the measure, Goldstein’s daughter, who also holds Dividend & Income Fund shares, sought to submit a nonbinding proposal to reduce the threshold for support to a simple majority of votes in contested elections.

In response, Dividend & Income Fund and its advisers petitioned the SEC in an ultimately successful effort to convince the agency that the nonbinding provision shouldn’t be permitted to come up for a vote at the fund’s 2020 annual meeting.

The activist investor said the SEC’s decision to grant the fund’s request could create a disturbing precedent that would encourage operating companies to revise their bylaws — or draft articles of incorporation upon their IPOs — to prohibit investors from submitting almost any shareholder proposal.

Here’s the podcast:

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