Shareholders play a large role within a company despite the fact that executives are the top of the management chain. Shareholder rights are essential to the success or failure of a business. A recent shareholder decision at the annual shareholder's meeting for Obagi Medical Products made a huge impact of the future of the company.

The shareholders at Obagi Medical Products made the decision to reject a proposal to ratify the company's shareholder rights plan. The shareholders voted against the company's poison pill tactic in a three to one margin. This vote was after a prominent advisory firm recommended the ratification.

The poison pill tactic is a strategy in which the company makes their stock unattractive or prohibitively expensive to an unwanted acquirer. Conflicts can arise between management and shareholders regarding the implementation of a poison pill plan. Some claim the shareholder rights do not provide shareholders the right to vote on the issue. Other conflicts arise when management's decision to ward off an unwanted acquirer is not in the best interest of the shareholders.

Obagi Medical Products faced this decision as the company faced an all-cash buyout. It has been reported the company has had several offers, all of which have been turned down by the company's management without proper consideration. These actions have made the shareholders worried about the potential implementation of a poison pill.

The company's management only owns 0.67 percent of the company's stock. This small amount of stock ownership by management alludes to a shareholder concern that management will put their own interests above the shareholder's interest. This scenario depicts how important shareholder rights are to a company and the impact of shareholder rights on the future of a company.

Source: Seeking Alpha, "Obagi Medical Products Shareholders Vote Down Management's Poison Pill," Scott Matusow, June 7, 2012