According to a recent report, shareholder activism increased by nine percent in the first half of 2024, with 449 companies in the U.S. receiving activist demands.
Shareholder activists are seeking "value creation opportunities at large, well-known companies." The Diligent Market Intelligence: Proxy Season Review 2024 report states that more than half of the companies that received shareholder activist demands are valued at more than $10 billion.
The costs associated with shareholder activism have increased significantly. The average cost of proxy contests increased from $3.1 million for companies and $660,000 for activists in 2020 to $4.4 million for companies and $1.7 million for activists in 2024.
The universal proxy card has led to more settlements between shareholder activists and companies. As of June 30, 2024, activists had secured 101 board seats at companies in the U.S. and four settlements.
Environmental and social (E&S) shareholder proposals subject to a vote at U.S. companies reached a record 349 in the first half of 2024. Six climate proposals received more than 40 percent support.
In high-profile Environmental, Social and Governance (ESG) campaigns, litigation is becoming increasingly common. "Shareholder Activism Increased by 9% in the First Half of 2024, According to Diligent" www.businesswire.com (Jul. 30, 2024).
Commentary
Shareholder activists (or activist investors) invest in underperforming companies, trying to improve their performance, and then selling their shares for profit.
Prevention efforts require organizations to take a hard look at all aspects of their operations. What are your organizations weaknesses? Do you have clear communication strategies with employees, management, and shareholders? Does your board composition need updating? Strong strategies, strong governance, and of course, strong performance of an organization can stave off shareholder activism.
U.S. shareholder activists, focused on ESG issues, commonly seek to put non-binding proposals to a shareholder vote at annual shareholder meetings. The proposals focus on civil rights, human rights and racial justice, workforce diversity, political spending and lobbying, climate-related targets and goals, and sustainability issues. "Shareholder activists may also use ESG as a wedge issue in order to appeal to a broader audience when seeking to change the composition of the board of directors by proposing activist-nominated directors for election at annual shareholder meetings."
https://www.engage.hoganlovells.com/knowledgeservices/news/recent-developments-in-esg-shareholder-activism-around-the-world-and-suggestions-for-risk-mitigation
