The nation’s largest pharmacy chain Walgreen Company (NYSE:WAG) said Monday it is giving activist investor Jana Partners LLC two board seats, despite the hedge fund only owning a relatively small 1% stake in the company.

Walgreen’s board seat a big win for Jana Partners

The hedge fund Jana Partners LLC holds about a 1.3% stake in Walgreen Company (NYSE:WAG), or 12.5 million shares. As part of the agreement, Jana’s founder Rosenstein will resign from the pharmacy chain’s board if that falls below about 6.3 million shares. Jana also agreed to not increase its stake to more than 4.9% of the firm’s total float.

The drugstore chain said that Jana Partners will recommend an additional independent director who has no ties to either the drugstore chain or the hedge fund. If another board vacancy opens and Walgreen decides to fill it, then the hedge fund and the nation’s largest pharmacy chain must agree on the replacement.

As reported earlier, Jana Partners recently took up a new position in Walgreen Company (NYSE:WAG). In its quarterly investor letter, it talked about the bold steps that the pharmacy chain has taken to win back its footing in the industry. The hedge fund believes that the market is not fully appreciating the importance of the pharmacy chain’s recent deals and their influence on earnings growth.

With just about a 1% stake, the activist investor got a board seat in the drugstore chain having a market capitalization of around $61 billion. David Benot of The Wall Street Journal cites another instance whereby Microsoft Corporation (NASDAQ:MSFT) granted San Francisco firm ValueAct Capital Management LP, which owned less than 1%, a single seat on its board. Several companies resist offering activists a single director seat fearing their influence once in the boardroom.

Walgreen reputation

The announcement gains significance as activist hedge funds push the envelope and try to shake things up at bigger companies.

Activists pushed for redomicile in Europe

In August, the biggest U.S. drugstore chain announced a deal to acquire the remaining 55% of the British pharmacy chain Alliance Boots it doesn’t already own, and also announced its intention to retain its headquarters in the U.S.

Recently Jana Partners and activist hedge funds in general were disappointed as they tried to convince the pharmacy chain to redomicile in Europe for tax purposes as part of the Alliance Boots’ deal. Nathan Vardi of Forbes believes Rosenstein has picked up a consolation prize by getting Walgreen Company (NYSE:WAG)’s board seat.