Generally throughout the nonprofit sector it is a rare thing that the public or more specifically, the user of a nonprofit's services, would move to fire a nonprofit exec or for that matter, the board. Has it happened? Yes, for example, where a college's alumni have called on the board to replace the President after learning of a plot to cut-back or close the school. But it is rare.
But, imagine. Would nonprofits be more responsive to their consumers assuming they have not been? For the most part I think it unlikely. In many cases, in particular nonprofits that serve folks who have fewer options, have consumers who's needs outweigh their unhappiness with the organization and it would likely be a real leap to connect poor or unsatisfactory service with the CEO or Board. In reality, many of these organizations, in my experience, write-off disgruntled consumers as individuals who are generically unhappy with every provider. On the other hand, think OpenAI - very messy with the firing and then re-hiring of the CEO/Founder and departure of original board members and onboarding of new members. I would pose that this was indeed an outside/inside fight with plenty of conflicts of interest also at play.
That said, I headed down this path with the announcement that Southwest Airlines and activist investor Elliott Investment Management strike deal on Southwest's leadership, including keeping CEO Bob Jordan; deal averts proxy fight. Proxy fights follow the following course according to Axios:
- First, activists find an undervalued stock. They won't launch a campaign unless they see a positive return for the effort. The best defense against activists is a rising stock price.
- Nobody wants a proxy fight. They're expensive and time consuming. So activists will try to get the company to make changes the investors deem necessary to jack up the stock price. Sometimes the company heeds the advice.
- Often, though, the company says, "Thanks for the advice, but we got this." From there, the agitation escalates.
- The two sides may eventually decide the private and public bickering over strategy isn't worth it, and they'll strike a settlement agreement. Usually that's in the form of a board seat or two and some strategy changes. Peace time follows, until next year anyway.
- If the two sides are far apart, and no settlement is possible, activists have a choice to make: stay in the stock and be a nuisance; sell and move on; or name a director slate, file a proxy and launch a full-on fight.
- Once the proxy fight is on, it's all about winning the hearts and minds of shareholders who will vote for the company's directors at the annual general meeting.
- Shareholders can vote early or in-person at the meeting, and they can change their vote up to the last minute. A win for activists or the company is getting all or most of their directors elected.
Axios covers Health Tech, Fintech, Media, Climate Tech and Retail deals.
But of course, this doesn't happen for 99% of nonprofits but why not other than there are no financial shareholders - except the public.