Shareholders Have Spoken at Applebee's

Applebee's (NASDAQ:APPB) may be the latest reminder that shareholder activism is a powerful trend these days, especially since it's so often wrapped up with governance issues. The latest case in point: Last week, Applebee's announced that its shareholders have elected two particularly interesting new directors to its board -- both of them nominated by hedge fund Breeden Capital Management.

The restaurant company's shareholders named Richard Breeden and Laurence Harris to the 14-member board, and they were elected with 95% of the vote, as were four existing board members who were up for re-election. Originally, Breeden wanted to try to get four of its director nominees onto the board, but further negotiations led to its agreement to push for two nominees instead. Applebee's said it will pay Breeden $500,000 for the cost of the proxy fight and will reduce its board to 12 members next year as part of the negotiation.

Breeden first started agitating for this change late last year, citing "severe performance problems" and "disregard" for shareholder interests at Applebee's. Breeden also complained of governance problems at the company -- for example, apparently Applebee's hastily amended its bylaws, a move that looked as if Applebee's were trying to make things harder for Breeden to nominate directors to the board this time around.

Applebee's is looking at options such as a sale, but considering how many rumored buyouts don't come to pass these days, a better-run company that's delivering more shareholder value wouldn't be a poor outcome, either. And Breeden seems committed to getting Applebee's back on track again.  

Seeing an activist's candidates get elected by shareholders certainly seems like a good sign that shareholders are starting to take ownership more seriously. Maybe corporate managements need healthy dissension to keep on track -- and dissension often seems to be the exception rather than the rule on corporate boards. On the other hand, activist shareholders' opinions have made a difference on many recent occasions. Wendy's (NYSE:WEN) spun off Tim Hortons (NYSE:THI) in response to shareholder pressure, and Borders Group (NYSE:BGP) recently canceled a convertible-notes offering after unidentified shareholders gave negative feedback on the idea.  

Applebee's still has plenty of work to do, and a lot remains up in the air. I wouldn't consider it as an investment right now, with so many moving parts. However, when it comes to craving a taste of change, its current shareholders have most certainly spoken.

For related Foolishness, dig into the following articles:

• Is a golden age of activism on the way?
• Some have high hopes for Applebee's.
• Revisit Breeden's intentions for change at Applebee's.

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Alyce Lomax does not own shares of any of the companies mentioned.