I Hate You, Don't Leave Me!

No one seems surprised that Blockbuster (NYSE:BBI) CEO John Antioco is back as chairman of the troubled video rental chain. Despite the fact that a majority of the company's shareholders voted him and two incumbents off the board in favor of corporate raider Carl Icahn and his industry veteran buds, Antioco was accepted back into the boardroom with open arms this past weekend. Why? Antioco stood to cash in on a severance package worth more than $50 million if he should decide to leave, and with Icahn looking to maximize his investment in the company, that kind of frivolous expenditure would have likely been frowned upon by the market.

Yet there's a real travesty here. Icahn only had a 9.7% stake in the company. Shareholders, in sum, were generally fed up with the direction the company was taking. Why is the board undoing what a majority vote wanted?

Look, as a Netflix (NASDAQ:NFLX) shareholder, I'm pretty excited to see Icahn have a vested interest in getting Blockbuster's cash flow growing again. Netflix shares were up a whopping 24% last week on the very notion that a more prudent Blockbuster would either bow out of the mail-delivered disc rental market (unlikely) or at least declare a ceasefire in the price war (more likely).

But there is something brutally wrong when shareholders are being bamboozled this way. The reappointment of Antioco came hours after Tim Beyers put out a brilliant piece on the importance of individual investors to get out and vote their proxies this time of year. Ironic?

A year ago, the ruckus at Disney (NYSE:DIS) came to a head when the majority of votes that were physically cast -- which represented just 43% of all votes -- wanted CEO Michael Eisner ousted. While there weren't enough battering rams to put that change in motion, even Disney's chummy board realized that the shareholders' concerns needed to be addressed. Eisner remained on the board but was stripped of his chairmanship, and shortly thereafter announced plans to step down as CEO.

That was shareholder activism in action. What Blockbuster did last week set back the investor empowerment movement. This wasn't simply rearranging the deck chairs on the Titanic. This was doing so while the majority of its passengers were arguing that the deck chairs could be used as flotation devices.

I'm not going to bash Antioco. He has proven himself in leadership positions in consumer-driven retail operations like 7-Eleven (NYSE:SE) and Yum! Brands (NYSE:YUM). When he argued against some of Icahn's suggestions -- like a massive dividend distribution or the need to actively pursue a merger with rival Hollywood Video -- I was completely in Antioco's camp. I would even have to concede that while Blockbuster's online business has been brutal to its bottom line, Antioco was right to look for a way to keep Blockbuster relevant going forward.

But that's just me. I'm not a Blockbuster shareholder. I didn't cast one of the many "no confidence" votes here. If the board's ridiculous compensation and severance packages are the reason why Antioco is still around, then that's just another reason to whip out a broom and sweep the boardroom clean next year as well.

Proxy nation intoxication
Proxy battles can be a glorious sight. And if history is any indicator, the dissidents usually get it right in the end. Consider the outcry at Hewlett-Packard (NYSE:HPQ) when a large chunk of shareholders nearly voted the printing giant out of the disastrous Compaq merger. The division has been a drag ever since, and Carly Fiorina's championing of the acquisition ultimately cost her the CEO position three years later.

Your more vanilla proxy battle may involve management spurring a buyout offer hurled its way. That can be exciting too. After all, you have a situation where corporate executives are urging shareholders not to vote in favor of an acquisition premium that they failed to achieve organically. Investors buy into a company with a "show me" attitude, and management in this case has to convince their shareholders that less is more in the long run.

Buyouts boring? No way. There was enough romance, drama, and rekindling in Oracle's (NASDAQ:ORCL) year-long courtship of Peoplesoft to make a daytime soap blush.

But a proxy battle's entertainment value is only secondary to its material significance to the actual investors. They own a piece, no matter how fractional, of that particular company. They have every right to speak their mind and if the voices in concert are loud enough, they have every right to a response. That's why what went down at Blockbuster is so wrong. Creating a new seat on the board for Antioco and handing him back the chairmanship keys? Preposterous!

They have treated the ballot box like a trash bin -- and that's not the only thing they trashed along the way.

Some more reasons to weigh that proxy you're holding:

• Tim Beyers asked shareholders to take part in the democratic process by casting their proxies this year.
• The proxy battle was lost at Hewlett-Packard in 2002, but the war waged on.
• Billionaire Carl Icahn has been a successful corporate raider for decades.

Longtime Fool contributor Rick Munarriz thinks that paper cuts can run deep when you're talking about proxy battles. He owns shares in Netflix and Disney. The Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.