Activist investor Starboard Value LP has failed in its bid to oust Box Inc. co-founder and Chief Executive Aaron Levie and two other directors from the company’s 10-person board.

The three directors easily beat Starboard’s candidates in a shareholder vote that followed months of posturing by both sides, the company announced today at its annual shareholder meeting.

Shareholders ultimately chose to re-elect Levie (pictured) as well as directors Peter Leav and Dana Evan. The result is a big blow to Starboard, which has built up an 8.4% stake in the cloud services firm and heavily criticized it earlier this year for what it said was its substandard performance.

Starboard first invested in Box in late 2019 and began agitating for change the following year, arguing the company was underperforming compared with its industry peers and not delivering on commitments. In 2020 it struck a deal with Box that saw two of its nominees placed on the board of directors.

Earlier this year, however, it took great exception to a $500 million investment from the private equity firm KRR & Co. Inc. The hedge fund described that move as a defensive tactic and responded in May by nominating three candidates to replace Levie and the others on Box’s board.

But Starboard apparently mistimed its move, because in the run-up to the vote, Box’s share price gained more than 20% thanks to two decent quarterly earnings reports. The company’s position was strengthened further when the proxy advisory firm Institutional Shareholder Services recommended investors re-elect the company’s directors, arguing that while Starboard deserves credit for operational and governance changes made by Box since last year, the current board deserves more time for those changes to bear fruit.

Box also made an unusual move when it filed a document with the Securities and Exchange Commission that pushed back against Starboard’s candidates.

“Box appreciates the support and perspectives we have received from our stockholders throughout this process,” the company said in a statement after winning the vote. “The Board and management team will remain focused on continuing to transform Box and executing Box’s strategy to grow profitably and deliver significant value to all Box stockholders.”

For Starboard, the defeat left a bitter and somewhat unusual taste in its mouth, being the first time it has lost a proxy vote in almost a decade, according to Reuters.

Starboard Managing Director Pete Feld, who was one of the three candidates trying to oust Box’s directors, complained the results of the vote were “skewed by the voting rights tied to the preferred equity financing and the use of stockholder capital to aggressively repurchase shares ahead of the record date from stockholders likely to support change.”

It’s not clear what Starboard’s next steps will be, but it does retain a significant stake in Box for now.

“As we have repeatedly stated, our only goal has been to help Box perform better and adopt best-in-class practices across operating performance, financial results, governance and compensation in order to create long-term value for the benefit of all stockholders,” Feld added. “We will continue to monitor progress at Box, and we hope to see the company embrace the changes catalyzed by our involvement and create long-term value.”

Analyst Holger Mueller of Constellation Research Inc. told SiliconANGLE Starboard’s reaction was not a surprise as boardroom battles are always bruising affairs where passions are heightened and tempers can flare. But he said today’s result is a vote of confidence in Levie from the company’s shareholders.

“That said the pressure on Box to grow and become more relevant will not go away,” Mueller added. “Recent moves like the new Box Sign capabilities are important cornerstones for the new growth strategies Box needs, but more will have to follow. Let’s hope Levie can safely steer the Box ship towards more growth and keep both the shareholders and customers happy at the same time.”

Photo: JD Lasica/Flickr