Consent Solicitation

Imagine you’re a pirate at sea. Your captain, who was chosen at the port on New Year’s Day, has led you astray. You’re worried you might not eat again. He’s hoarding all the water.

You want to start a mutiny. But the rules of the ship are that you have to wait until the ship reaches port, and that you’ll select a new captain and officers on the following New Year’s Day.

Naturally, those rules would hold a pirate hostage. Perhaps you send a note around to everyone else on board and ask them to take a vote. Maybe you'll subtly push for new leaders. Maybe you'll make the pirates walk the plank. Perhaps you'll throw them overboard instead.

In the corporate world, passing around a note to seek permission for changes would be similar to consent solicitations. Typically, shareholders don’t vote for officers until a company’s annual meeting. They also vote on other resolutions like compensation, bylaws, and shareholder expectations.

With consent solicitations, companies can host a shareholder meeting, but do it in writing.

Consent solicitations can lead to changes in directors or company bylaws, a decision that would then be relayed to the leadership of the company. Roughly 70% of companies ban consent solicitations, however, because they could have a dramatic impact on share prices or operations.