Six months into a battle between existing management and Starboard Value, shareholders will decide whether to keep AOL's existing eight-member board of directors or take on up to three Starboard-backed nominees that the hedge fund says will push for better returns for shareholders.
Starboard's activist approach has already had an influence on management, AOL Chief Executive Tim Armstrong told an investor meeting last week, though he repeated the company's contention that adding its nominees would be unwise.
"I see the effect it has. And look, I would love to say it is zero. It is not zero," said Armstrong, a former Google Inc official who took the helm of AOL in 2009 as it unwound from its disastrous merger with Time Warner Inc . "Putting somebody on our board who has been out screaming that our strategy doesn't work overall, as a personal investor, (is a) really bad idea."
Starboard has a 5.3 percent stake in AOL that makes it the company's fifth-largest shareholder, according to Thomson Reuters data. It launched a campaign late last year to shake up the internet company, including improving results in its display advertising operation and at the local-news site Patch.com.
Dissident shareholders have been gaining ground in board elections this year. Dissidents have won at least one seat in 12 contested elections this year, according to data from Institutional Shareholder Services.
SHAKING THE STATUS QUO
AOL officials have countered that Starboard Chief Executive Jeffrey Smith aims to liquidate the company.
"Despite our continuous effort to engage constructively with AOL to avoid this election contest, management and the Board have remained steadfastly committed to pursuing the status quo," Starboard said in a statement released last week.
Starboard's Smith plans to speak at the Boston meeting to advocate for three new directors - himself; Dennis Miller, a strategic advisor to Lionsgate; and James Warner, principal of digital marketing firm Third Floor Enterprises.
They are targeting incumbents Alberto Ibarguen, former publisher of the Miami Herald; Patricia Miller, former CEO of the Public Broadcasting Service, and James Stengel, a former Procter & Gamble Co executive.
Smith's nomination has won the support of proxy advisory firms Glass Lewis and Institutional Shareholder Services, with ISS also backing Miller.
AOL shares have surged 40 percent over the past year, greatly outpacing the 7.5 percent rise of the tech-heavy Nasdaq composite index <.IXIC>, after the company topped Wall Street's profit forecast for three consecutive quarters.
AOL has also tried to appeal to shareholders directly, saying it would hand over all the proceeds of its $1 billion sale of the majority of its patents to Microsoft Corp .
Starboard has claimed credit for that move, though AOL officials contend they had begun the patent-sale process before the hedge fund declared its interest in the company.
(Additional reporting by Ross Kerber; Editing by Richard Chang)