AOL's Directors Re-Elected In Proxy Contest

Tim Armstrong - AOL Buys Huffington Post conference - 2011
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At the company's shareholder meeting in Boston on Thursday morning, CEO Tim Armstrong defeats a push by an activist shareholder group.

At a shareholder meeting that was expected to be contentious, AOL's stockholders elected all of the company's incumbent director nominees, the company has announced.

Based on a preliminary vote count provided by its proxy solicitor, AOL's elected board will include CEO Tim Armstrong as well as Richard Dalzell, Karen Dykstra, Alberto Ibargüen, Susan Lyne, Patricia Mitchell, Fredric Reynolds and James Stengel. Two more independent directors will soon also be added.

The outcome was far from certain.

Activist hedge fund Starboard Value, which owned one of the largest stakes in the company with approximately five percent, had prepared to battle for AOL board seats. Starboard has been unhappy at AOL's direction, especially over losing more than $500 million a year on its display advertising business.

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Starboard attempted to put up its co-founder and CEO Jeffrey Smith and Dennis Miller, a strategic advisor to Lionsgate and former general partner at Spark Capital, as two of its five board candidates.

"There was a lot of attention around the (shareholder meeting)," says Armstrong in a conference call afterwards. "This is a very clear indication from our shareholders that the value of the company is going to be larger than it is today. We have deep and ongoing relationship with our shareholders and we expect that to continue."

Armstrong called it a "significant milestone" in the turnaround of the company. He reiterated the company's focus on increasing adversing, focusing on the strength of brands in the services and content space, and user engagement.

AOL posted a profit of $21.1 million for the first quarter, up from $4.7 million in the year-ago period. The company's revenues fell that quarter, down 4 percent to $529.4 million. On the other hand, advertising has been on the upswing, with four straight quarters of rises, leading to AOL estimates that the company would return to growth by next year.

In a statement following the proxy vote, AOL also put out this statement:

"We intend 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. Today's outcome reaffirms our strong belief that AOL has the right strategy and team to successfully execute on our plan to continue to deliver enhanced value for all stockholders."

At the meeting in Boston today, the shareholders also gave non-binding advisory approval on AOL's 2012 executive compensation policies.

News of the director re-election caused a stock sell-off for the company. As of 10:30 AM EST, AOL's share price is down more than five percent to just under $26 per share.