Jeff Bewkes Time Warner
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UPDATE: Time Warner’s board of directors has adopted a rule that affects how shareholders nominate alternative candidates for the board of directors.

The Time Warner board voted Jan. 28 to adopt a new rule mandating that shareholders that have owned at least 3% of the company’s outstanding shares for at least three years can have alternative candidates for the board of directors and a description of the rationale for their election featured in the company’s proxy materials for its annual meeting. That rule covers individuals and a group of up to 20 shareholders, according to an Securities and Exchange Commission filing made Tuesday by Time Warner.

The rule had been interpreted by some as a move by the board to help fend off takeover attempts at a time when rumors are swirling around the company. But Time Warner said the board’s move has no effect on limiting any shareholder’s right to nominate alternatives. The rule had been proposed by shareholders in the past but did not pass at annual meeting votes.

“This is a new right given to shareholders — it is not a change to an existing right,” Jefferies LLC wrote in a research note. “We do not believe this amendment is a reaction to recent market speculation related to shareholder activism.” According to Jefferies, Microsoft and Apple have recently adopted similar rules.

The board move comes as Time Warner has been seen as a ripe takeover target, now that the prototypical media conglomerate has slimmed down to three core TV and film units: HBO, Warner Bros. and Turner Broadcasting. Rupert Murdoch’s 21st Century Fox effectively put Time Warner in play in the summer of 2014 with an unsolicited $80 billion merger offer that was quickly rejected by the Time Warner board led by chairman-CEO Jeff Bewkes.

At that time, the Time Warner board quickly modified the company’s bylaws to remove a clause allowing shareholders to call for a special board meeting.

In recent weeks, Time Warner is said to have come under increasing pressure from activist investors pushing for a sale or further breakup of the company’s units. Published reports have indicated that some investors are pushing for Time Warner to spinoff HBO now that the global pay TV giant is moving aggressively into new markets with its broadband-only HBO Now service.

Investors can heap pressure on a company’s management by fielding nominations for alternative directors at annual meetings where board members stand for election or re-election. Time Warner faced the threat of such an attempt in 2005 when activist investor Carl Icahn targeted the company.

Time Warner shares are down 11% over the past 12 months, reflecting the broader market concerns about media stocks. Shares closed Tuesday at $70.52.

CORRECTION: An earlier version of this story reported that the new rule made it harder for shareholders to nominate alternative candidates for the board of directors.

(Pictured: Jeff Bewkes)

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