H&R Block (NYSE:HRB) shareholders are gearing up for this years September 6th board meeting where they will be faced with a decision whether or not to vote for incumbent board members or a new slate of three directors proposed by ex-SEC head Richard Breeden's hedge fund, Breeden Capital Partners. Shareholders are hoping that these new directors can implement a series of changes designed to jump the company's stagnant share price.

Richard Breeden, who owns a 1.8% stake in the company, has attracted widespread support for his proposal to narrow the company's focus to just tax preparation services by divesting everything else. The company's long history of failed diversification efforts has frustrated many investors and led to a stagnant share price that has many ready for change. Among other things, Breeden demanded that the company shut down its thrift division and focus on selling off its mortgage businesses while focusing on tax preparation services.

Unfortunately, the poor credit markets might prove to be a hurdle for any move to divest. H&R Block's current deal to sell its One Mortgage unit to Cerberus Capital Management was recently delayed until December 31st, which has many worried that the deal will fall through. Meanwhile, many other financial and strategic buyers are finding it very difficult to obtain financing. The company's business units may also prove to be too small for spin-offs onto the public market.

Shareholders and analysts seem unphased, however, after three proxy advisory services recently came out in support of his candidates while other activists holding a cumulative 15% of the outstanding shares are also expected to vote in favor of change. Whether or not Breeden is successful remains to be seen; however, this is definitely a stock to watch given his past success in activist situations!

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