A targeted strategy can help ensure your proxy vote passes without problems.

M&A Transactions are arguably the most consequential events companies can take on—for buyers, sellers and the C-Suites in the middle. From understanding shareholders to targeting the investors that truly matter, executives must be proactive in the run-up to these all-important corporate reforming proxy votes. This is particularly true when investor opposition and public scorn can stymie deals before they are consummated.

To ensure executives appreciate the risks and opportunities of M&A shareholder votes, Alliance Advisors has developed a list of Do’s and Don’ts, explaining how partnering with industry experts can help a deal go smoothly.

The Don’ts

Don’t assume you have the vote or be passive. For a shareholder vote to succeed, executives must know their shareholder base. Even with a premium-priced transaction, deals can only succeed if companies develop a detailed picture of their shareholders.

Careful stock surveillance or Ownership Intelligence is therefore important, because it offers an early indication as to how a deal is being met by the marketplace and investors. Ownership Intelligence is market surveillance that identifies and tracks the true institutional shareholders holding share positions and hiding behind custodians in a company’s stock.

Don’t forget about the sell-side analysts—they can be a powerful ally in articulating the deal terms. Too often, companies overlook the role of sell-side analysts during an M&A transaction. But these individuals are regularly in front of your investors. If analysts misunderstand or misinterpret the transaction, that misunderstanding can trickle into the shareholder base, especially for institutional investors who lean on analyst notes for quick takes.

Spend time ensuring the sell-side understands the transaction rationale. If you’re not proactive in this area, you run the risk of leaving the narrative to be interpreted—or misinterpreted—by others. And once a negative view takes hold in the market, it’s hard to unwind.

Even with a premium-priced transaction, deals can only succeed if companies develop a detailed picture of their shareholders.

Don’t believe your shareholder base has remained static. Pay attention to share-holder base shifts—stock loan analysis is critical. Once a deal is announced, the makeup of the shareholder base will change radically and rapidly. Stock loan analysis identifies the top institutions lending out shares to short sellers and helps you assess how this impacts the voteable share positions.

Why is this important? Because a large institution like Vanguard or BlackRock might report a significant record date stake in your company’s stock. However, since they both actively engage in securities lending, a portion of those shares could be out on loan and are not eligible to vote. This effectively reduces the voting power of that institution on its reported record date position.

Companies that fail to do this early in the transaction may find themselves wondering where certain institutional votes are at the last minute when fewer votes have appeared from record date positions. By this time, it might be too late to scramble to replace those lost votes.

The Dos

Do take a proactive approach—this is not a routine shareholder meeting. Just the threat of an activist investor seeking more is enough to know that companies must communicate with all investors, regardless of the premium involved. The statistics are stark: M&A demands appeared in over half of H2 2024 campaigns.

M&A votes demand an all-hands-on-deck approach; a company should have its regular proxy solicitor and IR firm on board. Don’t switch up your team. Now is not the time to be holding the hand of a new firm.

Do include retail shareholders in your strategy—they can make or break the vote. Retail shareholders specifically registered and NOBO shareholders can be the difference between a successful vote and failure. More times than not, companies facing tough votes have relied on the retail shareholders to push the vote over the needed threshold.

Retail engagement campaigns take time; that’s why it’s critical to plan upfront to include them in the overall strategy.

M&A shareholder votes should not fail, but they do, and if you’re a C-Suite executive or board member, you certainly don’t want it to happen to your deal. By adopting a targeted strategy—one dovetailing best-in-class ownership intelligence, end-to-end shareholder engagement with focused investor relations—companies can ensure M&A votes pass without problems.

This article first appeared in the Q4 issue of Corporate Board Member magazine HERE. Permission to use this reprint has been granted by the publisher. © 2025 Corporate Board Member magazine.

Corporate executives often wake up to unsettling stock price swings with no clear catalyst, news, filings or obvious events. In today’s markets, volatile price movements frequently extend well beyond the fundamentals. Algorithmic trading, macro-overlay strategies and exchange-traded fund (ETF) flows often drive disconnects, making market reactions appear irrational.

These dynamics have intensified in recent years. The rise of passive investing, the influence of retail traders, including retail trading platforms such as Robinhood, and the emergence of ‘meme stocks’ have all contributed to a market structure that is more fragmented, faster moving and harder to interpret.

For directors and executives, understanding these market forces should be a key priority to help elevate their company’s governance, finance and investor relations functions. Volatility can affect a company’s access to the capital markets, create an opening for shareholder activism and shape investor sentiment far more than earnings alone.

This article explains the forces driving stock price volatility, outlines best practices for communicating strategically and provides actionable steps to help leadership teams understand what is going on with their stock price.

What is really driving volatility – market microstructure in action

Algorithmic and high-frequency trading (HFT). These are automated platforms that execute trades based on momentum, trend-following, sentiment and statistical arbitrage rules. While these algorithmic and HFT participants often improve liquidity when markets are calm, they become more cautious in pricing risk assets with wider bid-ask spreads when volatility explodes. In turn, this often amplifies price moves through rapid feedback loops.

Well-known episodes like the May 2010 ‘Flash Crash’ of the Dow Jones, S&P 500 and Nasdaq Composite underscored how algorithms can overwhelm fundamentals. More recently, in March 2020, the COVID-19 pandemic induced sell-off showed how liquidity evaporated when HFT participants pulled back, exacerbating volatility just as investors sought to raise cash in a critical time of uncertainty.

Boards must understand that much of today’s intraday trading is detached from fundamentals, driven instead by speed and statistical relationships. This complicates the task of explaining short-term share price movements to investors.

Macro overlay trading strategies. Global news, interest rate shifts, inflation data and geopolitical shocks often drive exaggerated stock price movements. Quantitative macro and factor models sift through massive datasets and tilt portfolios toward regions, sectors and themes like growth, value or momentum. When multiple models converge, sharp buy or sell orders can trigger unusual stock price swings far detached from company fundamentals.

From 2021-22, surging global inflation forced central banks to aggressively hike reserve rates. For example, the Federal Reserve’s rapid tightening in 2022 sparked systematic derisking across equities, with risk assets repriced regardless of earnings results. For corporate finance executives, this meant compressed valuation multiples and narrower financing windows to raise debt or equity, factors well beyond management’s control.

Directors and executives must recognise that short term stock price action often reflects flows not fundamentals. All companies should have the tools in place to be able to spot the differences.

Boards and chief financial officers should connect macro-driven volatility to the company’s treasury management policy, including capital allocation strategy and timing of debt or equity issuance.

ETF flows and index events. ETF rebalancing, inflows and outflows add another powerful driver for individual stock price movements. The sheer size of passive funds means that rebalancing often creates concentrated buying or selling trading flows.

A prime example was Tesla’s addition to the S&P 500 in 2020. From the 16 November announcement date through the end of 2020, Tesla’s stock rose approximately 73 percent, primarily fuelled by index-tracking funds that had to acquire its shares. Similarly, the annual Russell index reconstitution regularly generates outsized trading volume and short-term distortions in shares of small and mid-cap companies.

Executives should anticipate these events and prepare investor messaging accordingly. For companies facing upcoming index changes, explaining to the board and shareholders that such moves are technical, not fundamental, can help manage expectations.

What should companies do?

Companies should reaffirm their long-term vision and the fundamentals supporting their value proposition. Ensure alignment across investor decks, management, discussion and analysis disclosures, earnings calls and shareholder outreach. Consistently highlight strategic priorities, execution progress and financial resilience. Market noise is inevitable, and credibility rests on demonstrating consistency and discipline.

Volatility presents opportunities to engage shareholders proactively. Use turbulent periods to connect with long-term holders and high-quality prospects to reinforce trust. Tailor outreach based on shareholder profiles, distinguishing fundamental investors from high-turnover traders who generally do not align with long-term ownership.

Board members and executives should ensure robust processes for monitoring not only their company’s stock, but also the dynamics of peers, sectors and the broader market.

The only way for companies to be sure of what is happening to their stock is to use a market surveillance firm to monitor trading in the stock. Market surveillance tracks real-time activity, monitoring order books, trading volume shifts and unusual liquidity patterns.

Market surveillance also provides settlement and ownership analysis to identify high-frequency trading patterns, separate long-term holders from algorithmic churn along with short interest analysis and fails-to-deliver as indicators of market pressure. Companies should monitor securities lending dynamics, including stock loan and borrow rates, particularly ahead of shareholder votes, activist campaigns or other key events.

More importantly, real time stock surveillance monitors and alerts companies to critical trading in their stock that detects early signs of activist involvement, ownership shifts and hard-to-identify activist tag-along investors.

Companies need to be careful of service providers that merely repackage stale 13f data and call it stock surveillance. By the time an activist shows up in a Securities and Exchange Commission filing, the benefit of early detection is lost. Monitoring buyers and sellers of a company’s stock in real time takes companies beyond standard 13f filers, to include pension funds, sovereign wealth funds, non-filing hedge funds and foreign investors.

Market surveillance tools and accurate ownership analytics can equip executives and their advisers with actionable intelligence and a competitive edge in managing volatility that goes beyond the basic reporting of share price performance and trading volumes.

Conclusion

Directors and executives must recognise that short term stock price action often reflects flows, not fundamentals. All companies should have the tools in place to be able to spot the differences.

Boards should incorporate market literacy into governance training. This prepares directors and senior management to evaluate when volatility reflects activism, or fundamentals versus technical flows, and to make better informed decisions on disclosure, capital markets activity and investor engagement.

Executives cannot control algorithms or macro flows or even an activist – but they can control how they respond. Stay consistent and disciplined in messaging, be transparent and communicate openly with stakeholders, and more than anything else, focus on the long-term drivers of fundamental performance to create shareholder value versus daily stock price fluctuations.

Volatility is inevitable in modern market structures. With disciplined leadership, proactive communication and a firm anchor to creating long-term shareholder value, companies can cut through the noise. Executives that embrace market literacy, monitor ownership changes and communicate consistently can withstand the turbulence, ultimately leveraging it to build credibility, reinforce investor trust and lower their company’s cost of capital.

This article first appeared in the September 2025 issue of Financier Worldwide magazine HERE. Permission to use this reprint has been granted by the publisher. © 2025 Financier Worldwide Limited.

With the 2025 North American proxy season now officially closed, emerging trends in executive compensation are offering valuable insights and shaping important considerations for boards going forward. Here, we explore some of these issues and ways boards and management teams can start to incorporate these into planning for next year’s shareholder meeting.

Say-on-pay support stays steady

A review of voting results for say-on-pay (SOP) proposals at Russell 3000 and S&P 500 companies reveals outcomes consistent with prior years. As of June, average support for the Russell 3000 was 90.6 percent and 23 companies (1.2 percent of total) have failed SOP so far this year. For the S&P 500, average support was 89.5 percent with five companies (1.2 percent of total) failing to secure majority support.

In general, SOP proposals receive overwhelming support from shareholders, with a relatively small number of companies failing the non-binding advisory vote. In fact, average support levels tend to fluctuate around 90 percent. While investors continue to show broad support for executive pay programmes, boards should be cautious not to become complacent about their pay programme. Issuers also understand that SOP support below 80 percent generally requires some level of response from the board. Further, staying attuned to the specific practices that tend to trigger investor pushback is essential to head off any surprises.

For example, of the 23 companies that failed to receive majority support, seven had underlying pay-for-performance concerns that were compounded by special awards, poor design practices, questionable rigour of performance goals, or insufficient shareholder engagement and related disclosure. This indicates that failed votes are rarely driven by a single factor. More often, they result from a cumulative set of shortcomings.

Large, one-time grants, often used for retention purposes or to bring on new hires, tend to draw criticism when lacking clear performance alignment. Proxy advisers and investors are expected to remain highly attentive to substantial one-time grants, closely examining both the justification behind them and the structural elements of their design.

Shareholders continue to prefer equity awards linked to performance goals (although we are starting to see some investors question some elements of performance-based pay). Proxy advisers, in policy guidance leading up to the 2025 season, hinted at taking a more holistic view of equity awards, balancing performance and time vesting elements.

Board and management should regularly evaluate compensation programmes against shifting investor expectations, supported by ongoing engagement efforts. They should also provide robust disclosure around one-time or discretionary pay decisions, detailing the rationale, alternatives considered, and alignment with shareholder interests.

DEI metrics disappearing from incentive plans

When ESG metrics started making their way into executive compensation plans, diversity, equity and inclusion (DEI) measures quickly became among the most commonly used. According to data from Farient Advisors, at the peak in 2023, 57 percent of S&P 500 companies incorporated DEI metrics into executive compensation. However, this fell to only 22 percent in 2025, demonstrating how political, legal and shareholder pressures have accelerated the removal of these metrics from executive compensation plans.

Some issuers are reframing their DEI programmes and disclosures to emphasise inclusion and employee engagement more broadly while downplaying diversity. Board and management should consider replacing quantitative metrics, like representation targets, with more qualitative measures.

Perks under pressure

Perquisites account for only a small portion of total executive compensation but are on the rise and experiencing renewed interest from regulators and investors. Two perks in particular – airplane use and security services – are experiencing significant increases. Based on recent analysis by Glass Lewis, chief executive air travel costs at S&P 500 companies saw a median increase of nearly 46 percent between 2019 and 2023. Median personal security costs surged 119 percent over the same period. Such sharp increases in chief executive perks not only raise cost concerns but draw scrutiny from regulators and shareholders alike.

While excessive perks, as a sole issue, rarely lead investors to oppose SOP, they can be an indicator of weak pay for performance design, and prompt investors to delve deeper into a company’s pay programme. At the same time, regulators are seeking more disclosure around these expenses. Disagreement over the classification of these benefits is often at the root of Securities and Exchange Commission (SEC) challenges. For instance, the SEC considers executive security expenses a personal benefit, making them a disclosable perquisite, while many companies classify them as business expenses.

Boards and management should benchmark their perks payments: outliers draw scrutiny, so reviewing how you compare to peers regularly is important. Also important is reviewing your internal classification framework to ensure it reflects SEC guidance.

Rules of investor disengagement

Mid-proxy season, the SEC updated its guidance on Schedule 13G and 13D filings for investors owning more than 5 percent of a company’s share capital, tightening the criteria for beneficial ownership reporting and clarifying when investors must file a long-form Schedule 13D versus a short-form 13G. While the SEC indicates these adjustments were intended to enhance transparency, they have also had a chilling effect on investor engagements, discouraging some institutional investors from actively participating in governance discussions.

The result? Reduced visibility into institutional voting behaviour and rationales. For companies that received low SOP support, gaining a clear understanding of which aspects of their pay programmes are triggering concern may be more challenging this year. It remains to be seen if investors will feel less confined during the off-season engagement cycle, when discussions are not necessarily tied to specific items up for vote. However, in the meantime, getting the feedback you need may require an altered approach.

Board and management should keep discussions topic-specific as opposed to company-specific. Investors may be more willing to discuss their broad views on topics and what they consider best practice. In addition, the new guidance pertains to 5 percent holders, so consider expanding outreach to holders below this threshold for more candid conversations.

Next steps for 2025 and beyond

For those companies that are concerned about their executive compensation plan, the key is to reach out to their shareholders to pressure test their current plan. Starting the dialogue now with a comprehensive shareholder engagement outreach programme enables companies to course-correct for 2025 and lay the groundwork for a more defensible plan in 2026.

This article first appeared in the September 2025 issue of Financier Worldwide magazine HERE. Permission to use this reprint has been granted by the publisher. © 2025 Financier Worldwide Limited.

Shareholder activism remained high throughout the first half of 2025, as market volatility and uncertainty created a challenging environment for companies during the proxy season. Both prominent and smaller investment funds were highly active, with targeted companies entering into settlement agreements more swiftly than ever before. Looking ahead to 2026, boards must remain especially vigilant, recognising that even well-intentioned decisions may come under activist scrutiny.

FW: Looking back over the past year, what key trends have shaped shareholder activism?

 Riches: Market volatility and uncertainty has created a challenging environment for companies in the 2025 proxy season. Settlements with activists have been on the rise over the past few years since the introduction of the universal proxy card but the current market dynamics have created an extra incentive for boards to find an agreement with dissidents rather than face even more uncertainty by engaging in a proxy contest. There has also been a significant reduction in the number of shareholder proposals companies have faced, in part due to the changes to the Securities and Exchange Commission’s (SEC’s) ‘no-action’ rules which rescinded previous guidance, increasing the burden on companies which were looking to deny proposals. Environmental, social and governance (ESG)- focused proposals have faced greater scrutiny, a trend which was also reflected in voting results as shareholder support for environment and social proposals in 2025 have declined.

Tucker: Shareholder activism does not exist outside of the broader market, so the element having the biggest impact was volatility. Market disruption across the first half of 2025 had a significant impact on many activist engagements, often benefitting corporates. The changes afoot in global capital markets were seen as creating real uncertainty, and this put a near complete pause on activist attacks calling for significant corporate change – very similar to what we saw in the first half of 2020. As we look ahead to 2026, we will see activists and investors recalibrate and re-engage in our new reality quickly. Boards should not expect a free pass next year.

Tetelbaum: Q1 2025 was the busiest first quarter for shareholder activism since 2022, with activists continuing to target many of the largest companies across a range of sectors. Although there were a few high-profile activism battles that resulted in full proxycontests, the vast majority of activism matters in Q1 were resolved through settlement, including settlements mere weeks from when the activist surfaced at the company. Onenotable trend from the prior year is that activists privately submitted nomination notices at companies, often naming individuals from the activist’s fund as director nominees – raising questions about whether a full campaign was truly intended or if the move was primarily a strategic negotiation tool.Companies facing these situations nevertheless were compelled to devote valuable time, energy and resources to prepare proxy statements and explore settlement options with the activists. The short time periodbetween nomination windows and when proxy statements must be filed puts tremendous pressure on companies to dual track ‘fighting’ and ‘resolving’, especially in situations where companies are ambushed by activists a mere few months before an annual meeting.

Glover: Activism levels were very high during 2024 and have remained high during the first half of 2025. Activism hasbecome a global phenomenon, and the total number of funds has continued to grow. Many of the big name funds have been very active, launching multiple campaigns. Smaller funds have also been active. Companies targeted by activists are enteringinto settlement agreements more quickly than was the case in the past, and the number of campaigns that result in proxy contests has diminished. Theincreased willingness to settle may be attributable in part to the universal proxy card, which makes it easier for activists to target individual directors. It may also be attributable to the fact that institutional investors are more receptive to activist proposals than was the case in the past. There are an increasing number of situations in which multiple activist funds challenge the same company. Thisphenomenon may be a product of growth in the number of funds and competition for targets. It may also reflect the activists’ recognition that when they join forces the pressure on the target increases. In some multiple activist situations, however, the activists do not take the same position. The end result is more complexity for the target.

Scrivano: Activists have maintained a focus on total shareholder return (TSR) and operational performance, with TSR and performance weakness still being the major activist campaign attractant. Furthermore, the spotlight continues to be on operational improvements, such as cost cutting and operating expense reduction. Corporate governance weaknesses have also drawn activist attention. Recently, tariffs and market volatility have disrupted M&A, which has in some cases increased activist activity at particular companies, while decreasing it at others. This past year has also seen a significant number of break up or divestiture campaigns by activists, including at some fairly large companies, such as CVS, Honeywell, Becton Dickinson, Kenvue, Warner Bros. Discovery and others. Unsurprisingly, the universal proxy card continues to facilitate split votes between activist nominees and company nominees. In addition, activist funds have resumed nominating their own employees to boards.

FW: Which issues are currently driving activist campaigns, and how do shareholder-friendly legal frameworks influencetheir likelihood of success?

Tucker: There is a focus on calls for companies to look at where business lines could be separated. In the past few years, there has been a real increase in the number and size of spin-off transactions. Most of all, we see the market consistently rewarding companies that pursue these transactions. This dynamic really challenges aboard to articulate the benefits of the combined company and the risks of separation, both areas where concrete data is often hard to find. These arguments tend to focus on long-term stability, whichrequires a significant level of trust between investors and boards. Activists are adept at claiming any resistance to a separation is simply entrenchment.

Tetelbaum: Activists continue to prioritise short-term agendas that can come at the expense of long-term value creation, relying on a tired formula of targeting ‘underperforming’ companies. Activists often use cherry-picked metrics, challenging long-tenured directors, irrespective of the institutional knowledge and industry expertise they may bring, and push for event-driven outcomes such as breaking up or selling the company, even if at inopportune times. Even the smallest hedge funds are legally permitted and practically able to buy into a company and run a control proxy fight without meaningful financial commitment or any long-term orientation. The disruption caused by many activist campaigns risks undermining the board’s deliberative processes, continuity and cohesion that are essential for sustained corporate performance and long-term value creation.

Glover: Over the past year, more and more activist campaigns have focused on operational and strategic issues. For example,activists have been making arguments that a company should employ more effective cost controls, devote more resources on high margin businesses, or otherwise adjust business strategies. In many cases they have also argued that the chief executive and other members of the management team should be replaced. These kinds of campaigns often take time to gain momentum, but if theysucceed they can generate significant returns for the investor. The number of campaigns focused on M&A issues has declined somewhat, which may be in part because the M&A markets have been relatively cold. The SEC’s decision to adopt the universal proxy card rule two years ago has probably helped activists by increasing pressure to settle. Delaware courts’ insistence that bylaw regulations governing access to the shareholder meeting ballot should not be unduly restrictive has also helped activists.

Scrivano: TSR or performance weakness continues to be the driving force in activist campaigns. It tends to be challenging to defend directors or a board that has overseen TSR or performance weakness for a durationally significant period of time. Operational improvements and cost overruns also invite scrutiny. In parallel, portfolio review, especially in cases where a company division could be sold or spun off, and companies integrating M&A, are targets for activists. Single classboards open up the potential for a control slate. Over the last 20 years, the staggered board has become rarer at Fortune 500companies, with many having pre-emptively de-staggered their boards. Many of these companies took solace in the fact that they were large enough that they did not need tofear a takeover offer; however, they did not see the threat on the horizon of activist attacks that do not seek to acquire the company but rather to obtain control at the board of directors level.

In recent years, there has been a notable rise in activist campaigns explicitly targeting chief executives and chairs of the board.

ELINA TETELBAUM
WACHTELL, LIPTON, ROSEN & KATZ

Riches: In February 2025, there was an expansion in SEC guidance regarding shareholder engagement, which put investors at risk of having to adhere to more stringent 13D filing requirements should they be deemed to engage in a way which could effect change or influence control at a company. This resulted in many stewardship teams adopting a listen-only approach in meetings with both activists and companies, creating further uncertainty around how they may vote. It is not just institutions that have come under scrutiny in 2025 as leading proxy advisory firms ISS and Glass Lewis, which issue voting recommendations for their institutional clients, have faced legal pressure from the state of Texas. Texas passed a law which restricted the proxy advisers’ ability to advise shareholders on ESG factors. ISS and Glass Lewis have responded by suing the state on the basis that the law violates their First Amendment right. It is notable that both ISS and Glass Lewis have been far more supportive of activist nominees in 2025 and activists have been more successful in winning board seats as a result.

FW: What strategies are activists using to assert influence and drive change? How have these tactics evolved in recent years?

Tetelbaum: Activists today employ a variety of strategies and tactics to influence boards in pursuit of short-term returns. For example, some activists rely heavily on media-driven campaigns, using headline-grabbing narratives to shape public perception and investor sentiment. Others pursue more behind the scenes engagement, working directly with boards on substantive strategic initiatives. Although there is a practiced activist playbook, each activist has a different style and set of objectives, driven by the personalities involved. In recent years, there has been a notable rise in activist campaigns explicitly targeting chief executives and chairs of the board. While any activist campaign that criticises a company’s strategy and operations can be viewed as an implicit attack on the company’s management, activists have been more often explicit in advocating for chief executive replacement. Correspondingly, there has also been an increased number of chief executive departures and resignations at companies targeted by activists in recent years, even after the chief executive prevails at the ballot box. This trend has magnified the importance of boards being fully aligned with management’s strategy, as anydaylight between a management team and its board may be amplified under the stress of an activism campaign.

Glover: The activists’ basic playbook has not changed for many years. They look for a target that represents a good opportunity because it is under leveraged, has lots of cash on the balance sheet, presents M&A opportunities, underperforms its peers or has strategic or operational problems. Activists also look for situations where they think they can persuade shareholders that the company has poor governance or a weak management team. When they find a suitable target, they will request meetings with the management team and the board at which they will describe their complaints, and perhaps also request the company to appoint new directors to help implement change. At the same time, they will seek support from other stockholders and may also seek topersuade other activist firms to join forces. If the target company does not agree to settle quickly, the activists ratchet up the pressure by going public and threatening a proxy contest. Activists have improved their game in a number of respects in recent years. In particular, they havebecome more sophisticated about proposing operational and strategic changes, and they make more fully developed arguments for why changes are appropriate. They may enlist support from formerboard members or executives. They select qualified director candidates and press harder for early settlement. In addition, a number of funds have gained traction by arguing that they will be friendly and supportive of management if management is willing to implement their proposed changes.

Riches: Activists have continued to target company chief executives, with the number of activism-related chief executivedepartures steadily increasing year on year since the pandemic. Given the subdued M&A environment of recent years, an increased focus on operations and corporate strategy has led to chief executives coming into activists’ crosshairs much more frequently, with activists applying pressure on boards to hold chief executives to account over any previous strategic missteps. ‘Vote no’ campaigns have also been used more frequently than ever before as activists look to prevent the election of the company’s directors. These campaigns give an activist more flexibility around the timing of a campaign, as they need not comply with nomination deadlines, as well as on the cost and scope of the solicitation. A ‘vote no’ campaign can serve as a litmus test for shareholder sentiment and help activists send a message to a company that change is required.

When investors believe that the management team is listening to them and responding proactively, they are much more likely to support management if and when an activist appears.

STEPHEN I. GLOVER
GIBSON, DUNN & CRUTCHER LLP

Scrivano: In a departure from the traditional activist tactic of a private approach combined with increasing pressure and then apublic disclosure, certain activist funds have resorted to issuing public letters to companies or filing schedule 13Ds disclosing a substantial stake in companies with little to no warning to those companies. Recent examples include Wolfspeed, Rapid7, Qorvoand others. In addition, certain activist funds, such as Elliott and Ancora, have been more willing to propose a control slate in a proxy contest, as occurred in Southwest and Norfolk Southern, respectively. A more stark example is Gildan Activewear’s entire board resigning in response to an activist campaign by Browning West. Swarming is another tactic that has continued  to occur, whereby multiple activists target the same company, often around the same time.

Boards need to think about where support can erode slowly overtime and recognise that shareholder engagement is more akin to a relationship that needs to be nurtured than a transaction.

PAT TUCKER
FTI CONSULTING, INC

Tucker: One of the more notable trends we have observed over the past few years is the speed of settlements and the increase in private settlements, such as where a company and activist settle without any prior public disclosure of the activist’s position. At the same time, we are seeing an increase in activists forming strategic committees through settlement. These trends, taken together, really indicate activists’ significant ability to quickly change the direction of a company. Alongside this, we are seeing a generational change with new funds being started quickly. In our experience, the new funds are moving more aggressively as they need to prove a differentiated rate of return and a brand their limited partners would recognise.

FW: Have any recent activist campaigns stood out to you? What lessons can be drawn from their execution and outcomes, such as changes in board composition or corporate strategy?

Scrivano: Activists are continuing to push for change after board victories. At Norfolk Southern, Ancora’s board victory led to international investigations resulting in the termination of the chief executive and general counsel. A similar pattern emerged at Kenvue, where Starboard settled for three seats and then orchestrated the ousting of the chief executive several months later. Mantle Ridge also stands out – by targeting the chief executive of AirProducts, among other directors, in a proxy contest – the chief executive lost his board seat in the proxy contest and resigned shortly thereafter. Another notable development is that certain tier one activists that have previously not taken a contest to a vote are now doing just that, as seen with Elliott’s successful proxy battle at Phillips 66.

Tucker: There have been several campaigns in recent years that have put chief executives in focus. These stand out as a number of these engagementswent through a proxy fight where chief executives consistently remained in their jobs. That is a really important lesson that it is easier for activists to replace directors than to replace chief executives. It also affirms that in fights that focus on operational issues primarily, the investors remain sceptical that activistshave any special insight.

Riches: One of the most interesting activist situations took place at healthcare products distributor Henry Schein. The company initially faced pressure from Ananym Capital Management which had been gearing up for a proxy contest. However, before Ananym had a chance to nominate, Henry Schein announced a deal with private equity (PE) behemoth KKR, which became one of the company’s largest investors and took two seats on the board. An expanded share repurchase programme was also initiated and in the months since, the company’s president has stepped down and Henry Bergman, the company’s long-term chief executive, has announced his retirement. This situation is a perfect illustration of how PE can utilise activist strategies and highlights how activism and PE are converging.

Glover: Recent campaigns in which activists have successfully argued that a company is underperforming and that the chief executive should be removed have been interesting to watch. These campaigns demonstrate how much pressure activists can applyto boards of directors. It has also been interesting to watch the relatively few campaigns that have resulted in a live proxy contest, since contests generally go forward only when the target board strongly believes that it is on the right side of the debate with the activist. Finally, it has been interesting to see activists look for opportunities outside the US and launch campaigns in other markets.

Tetelbaum: No two activist situations are alike and many of the most interesting situations are resolved behind the scenes. For boards and management, it is often a key priority to minimise the distraction and potential disruption that public campaigns can cause for stakeholders. The most high- profile situations are ones with the most well-known activists at blue chip companies, especiallythose that get close to, or go the distance to, a vote. Proxy battles that go the distance usually do so because of the irreconcilable differences between the objectives of the board and the activist. Boards thatare well advised and maintain consistent engagement with shareholders are best positioned to go the distance and prevail in a vote.Success lies in maintaining year-round dialogue – not just during proxy season – while delivering a clear, consistent and uniformmessage and articulating a long term strategic vision aligned with shareholder interests.

Companies should be establishing relationships and communicating the company’s strategy and plans to these institutional investors, even if there is no activist threat on the horizon.

PAUL SCRIVANO
DAVIS POLK & WARDWELL

FW: How would you define institutional shareholder engagement, and why has it become a critical component of activist defence?

Tucker: Institutional shareholders are absolutely essential. In most public companies, the top 20 or so investors control more than 50 percent of the vote. That is ultimately a relatively small constituency that can dictate the outcome of a proxy fight. Far too often we see engagement with this group become perfunctory and stale. Management teams can easily get into a repetitive groove and miss any nuance in feedback that would indicate the mood is shifting. We think there is woeful underinvestment in credible research and data in this space. No elected officials stake their careers on anecdotal experience with voters, so why do boards?

While operational activism has outstripped M&A-relatedcampaigns in the years a er the pandemic, companies should expect activists to increase their focus on transactions as market conditions improve.

ADAM RICHES
ALLIANCE ADVISORS

Riches: Institutional shareholder engagement is a programme designed to connect with a company’s largest institutional investors. The process begins by accurately identifying the beneficialowners behind custodial accounts and analysing their historical voting behaviours, as well as reviewing available voting rationalesand other relevant research. Following this analysis, targeted outreach is conducted by the board or senior management to these key institutional shareholders. These direct engagements provide valuable insights into investor perspectives, including concerns that may have led to opposing board nominees or executive compensation. The feedback obtained enables companies to proactively address potential gaps or weaknesses in their governance practices, potentially reducing their vulnerability to activist interventions.

Glover: A company that is the target of an activist campaign can reach out to its shareholder base in a variety of ways. It can issue press releases, make statements in social media and mail letters to stockholders in which it responds to the activist’s arguments and explains management’s plan for the company. If the activist launches a proxy contest, the target can also make its case in its proxy statement. These company materials can also be posted on a website. One on one meetings with significant stockholders are a critical part of the shareholder engagement process. These meetings are very important because they help the company identify which investors are its strongest supporters, which are on the fence, and which are likely to side with the activist. They also help the company determine whether the arguments it is making resonate with shareholders, whether it should make changes to those arguments, and whether it should consider settling with the activist or continue to fight.

Scrivano: Institutional shareholders remain critical to the outcome of any proxy contest. The big three passive investors, BlackRock, State Street and Vanguard, continue to play a decisive role in winning proxy contests. Many times, these investors tend to back incumbent directors, and are less likely to back an activist slate. Large institutional investors are also very important, and companies should be building and maintaining relationships with these key shareholders; after all, the activists are certainly hard at work trying to build these relationships. Ultimately, continued shareholder engagement with all institutional investors, whether large or small, is key. Companies should be establishing relationships and communicating the company’s strategy and plans to these institutional investors, even if there is no activist threat on the horizon.

FW: In what ways can shareholder engagement serve as an early-warning system to identify governance vulnerabilities before they attract activist attention?

Scrivano: Regular meetings with the company’s shareholders are the best way to build and maintain relationships. These meetings can also serve as an early warning to management and the board of shareholder unhappiness with management or performance or activist threats on the horizon. Additionally, stock watch programmes offered by proxy solicitation firms can serve as an early warning sign of activist interest by alerting companies to unusual reading patterns, such as unusual activity in the company’s stock – to the extent ascertainable – at prime brokers connected to the company’s stock. Vote analysis is a useful tool in assessing the company’s and the activist’s chances for victory in a proxy contest. Internally, companies should also monitor their investor relations inbox – complaints and negative feedback from shareholders sent to investor relations may indicate vulnerabilities.

Glover: Engagement with institutional and other significant investors before an activist campaign starts can provide an effective early warning system. If a company’s internal investor relations team meets regularly with investors, it can learn about the investors’ concerns and develop and explain management’s plan to address these concerns. If the company’s proposed solutions do not resonate with the investor base, management can consider adjustments that accommodate investor concerns. When investorsbelieve that the management team is listening to them and responding proactively, they are much more likely to support management if and when an activist appears.

Riches: Institutional shareholders prefer to invest in companies that demonstrate long term value creation, good governance and a low to moderate risk profile. As part of an investor’s due diligence, they typically initiate a governance risk assessment and when companies reach out through shareholder engagement, institutions convey their concerns to management. Should quarterly and annual results disappoint, then governance weaknesses become more prominent and a larger discussion point. Should these concerns not be addressed sufficiently and financial results continue to underperform peers, they become an entry point for potential shareholder activism. Shareholder engagement serves to alert companies to structural governance issues that institutions and activists may find unfavourable and allows for these issues to be addressed before an activist appears.

Tetelbaum: While stock watch firms can monitor activist activity through investor relations pages and occasionally anticipate activist threats, activists have grown increasingly adept at operating discreetly. Many build significant positions while remainingunder the radar, leveraging sophisticated strategies to avoid early detection. Despite their capabilities, activists rarely presentwholly novel strategic ideas. Boards that engage regularly with shareholders are better positioned to anticipate concerns and evaluate strategic alternatives on their own terms. Proactive engagement enables boards to develop deeper insight into shareholder priorities, mitigating the risk of being caught off guard. When faced with business suggestions, boards should respond deliberately, assessing each suggestion in good faith and equipped with adequate information and expert guidance. Incorporating insights from analyst reports can furtherenhance a board’s understanding  of its vulnerabilities and help refine its strategic direction. Ultimately, staying ahead of activism requires regular stakeholder engagement and a commitment to thoughtful governance.

Tucker: Too often boards view engagement with shareholders in a black and white framework: investors are either for us or against us. For a long time, that was effectively true. If an investor owned the shares, they were supportive; if they were not supportive, they sold their shares. Markets have changed in structure and investment style, making this dynamic no longer true. Boards need to think about where support can erode slowly over time and recognise that shareholder engagement is more akin to a relationship that needs to be nurtured than a transaction. One simple trick is for boards to evaluate annual general meetingvoting results and ask where shareholders expect them to respond and if more context is required.

FW: What emerging issues are likely to shape shareholder activism in 2025 and beyond? How should companiesprepare to respond?

Glover: The number of campaigns focused on operational issues will likely continue to grow. If the M&A markets become more active, campaigns that focus on M&A issues will make a resurgence. Companies are likely to continue to settle quickly, particularly when they are challenged by a well-known activist with a strong marketplace reputation or are targeted by multiple activists. Activists are less likely to focus on ESG issues than was the case in the past. A campaign that argues that a company should focus on ESG issues will not win strong support unless the activist can show a clear connection between those issues and economic returns.

Riches: While operational activism has outstripped M&A- related campaigns in the years after the pandemic, companies should expect activists to increase their focus on transactions as market conditions improve. Activists have already been focusing on break-up and spin-off demands to find higher valuations, and corporations need to ensure that they are communicating to both shareholders and the market in general why businesses across different industries should remain integrated. While it is been harder for activists to push for companies to sell within the current regulatory and macroeconomic environment, boards still need to demonstrate that they have not ignored ‘strategic alternatives’ and have a response ready should an activist look to apply pressure.

Tetelbaum: In today’s volatile environment – shaped by M&A uncertainty, tariffs, ongoing geopolitical conflicts, the rapid adoption of artificial intelligence and an evolving media landscape – boards are under heightened scrutiny. Any misstep in navigating a crisis risks being reframed by activists as a governance failure. In this context, boards must be especially vigilant, recognising that even well-intentioned decisions may be second-guessed in hindsight. The most effective preparation involves disciplined governance: using the board calendar and agenda strategically, anticipating risks and ensuring decisions are grounded in well-informed analyses. Byacting on a reasonable and informed basis, while maintaining records of the decision-making process, boards can improve theircredibility and resilience when faced with activist threats.

Tucker: We think there will be two major focus areas in shareholder activism going forward. The first will be a continued focus on operational improvement campaigns, where activiststarget relative performance, both in terms of revenue growth and profitability. This will be particularly noteworthy, as changes toglobal trade are creating tangible costs and strategic dilemmas for nearly every company. Activists will be quick to target companies that are perceived to be falling behind. We also think we will see a reinvigoration of activists focused on M&A-oriented themes, both continuing the separation theme and returning to a call for companies to be sold.

Scrivano: Looking ahead, shareholder activism will accelerate and continue to evolve. It will likely continue trending toward faster, more public and coordinated attacks. We are seeing certain activist campaigns begin with a public announcement of a position, with little to no advance warning to the company – that tactic may be used more frequently going forward. At the same time, the persistence of swarming continuesto pose challenges. Large stake building is also on the rise, giving activists an outsized presence in proxy fights. In response, companies should reassesswhether a poison pill – triggering at 10 percent – might be effective to prevent a rapidaccumulation of shares. If an activist rapidly accumulates in excess of 10 percent of a company’s shares and continues to buy, concerns of creeping control and the loss of a level playing field in a proxy contest begin to arise.

This article first appeared in the September 2025 issue of Financier Worldwide magazine. Permission to use this reprint has been granted by the publisher. © 2025 Financier Worldwide Limited.

Over the last 25 years, investor activity in U.S. equity markets has undergone a dramatic transformation. Following more than a decade of structural decline, institutional and insider turnover across the S&P 500 appears to be reawakening. The first quarter of 2024 marked a modest yet meaningful uptick in rotation, reversing a long-running trend of investor inertia. While overall activity remains below historical peaks, recent movement hints at a changing posture among long-term holders.

Larger institutional investment managers who manage over $100 million in assets are required to file quarterly reports known as Form 13F filings with the SEC. These filings disclose their holdings of publicly traded securities, offering insight into the investment behavior of large institutions such as hedge funds, mutual funds, pension funds, and insurance companies.

Using 13F filings and insider transaction data, the accompanying chart captures turnover as a percentage of shares outstanding, averaged across current S&P 500 constituents. Several inflection points mark this 25-year trajectory:

Dot-Com Aftermath (2002)

In the wake of the tech bubble, institutional investors rapidly reshuffled positions. The collapse of overvalued internet stocks triggered a wave of portfolio de-risking, resulting in one of the sharpest turnover spikes after the year 2000.

Global Financial Crisis (2008–2009)

Turnover peaked at a historic high of 26.77% driven by fear-based rebalancing, margin calls, and liquidity stress. This period marked a structural inflection in institutional behavior, followed by a prolonged decline in activity.

Q1 2013 – Post-’Fiscal Cliff’ Rebalancing

Following the resolution of the U.S. “fiscal cliff”—a set of expiring tax cuts and scheduled government spending cuts that threatened to trigger a recession if left unaddressed—in late 2012, investors reentered equity markets with renewed confidence. Institutional portfolios rotated into cyclical sectors and captured profits, leading to a sharp spike in turnover.

COVID-19 Pandemic (2020)

The early 2020 shock briefly reignited turnover as volatility forced tactical repositioning. However, this activity quickly subsided, and long-term investor engagement remained muted despite continued macro uncertainty.

Record Low Amid Retail Surge (2021)

As retail investors took center stage during the meme stock era—a period defined by the explosive rise of heavily shorted stocks like GameStop and AMC driven by online communities—institutional turnover fell to a record low of 11.96%. Passive flows and intense retail engagement likely displaced traditional portfolio rotation.

Q1 2024 – Active Management Reawakens

After years of subdued movement, Q1 2024 reflected early signs of institutional reengagement. Active managers began reasserting themselves amid fading retail momentum, a more stable rate environment, and evolving macro narratives. Insider participation also ticked up, suggesting rising conviction among corporate executives.

Q1 2025 – A Subtle Inflection

The most recent reading in Q1 2025 shows turnover climbing to 15.2%, extending the upward shift seen in 2024. While still modest in absolute terms, the movement suggests a possible turning point in long-dormant active investor behavior.

Post-2010 Decline in Turnover: The Rise of Passive Titans

While market shocks have triggered short-term turnover spikes, the dominant structural trend since 2010 has been a sustained decline in investor turnover—and the asset management landscape offers a compelling explanation.

Over the last 15 years, the concentration of equity ownership among the top 10 asset managers has grown substantially. Their total equity assets under management (AUM) ballooned from under $3 trillion in 2010 to over $19 trillion in early 2025. This growth correlates with the meteoric rise of passive investing, largely driven by index-tracking giants like BlackRock, Vanguard, and State Street.

Notably, this shift also displaced some prior incumbents from the top 10 list, including Barclays Global Investors, AXA Group, Allianz Group, and Deutsche Bank. UBS Group, which once topped the list in 2006, has also since fallen out of the top ranks.

Unlike active managers who frequently rotate holdings, passive funds maintain static positions, adjusting only for index changes or investor flows. As passive vehicles amassed trillions in equity exposure, they structurally reduced aggregate turnover across the S&P 500—even as market capitalization soared.

Key Observations

Turnover Suppression Effect: As passive (investors base) AUM rose, institutional turnover steadily declined, even during volatile macro periods.

Ownership Concentration: A small set of asset managers now hold large swaths of public float, dampening trading activity.

Market Structure Impact: Passive capital has created persistent, low-turnover ownership, reducing responsiveness to fundamentals in favor of index-level flows.

More Filers, Less Activity: A Participation Paradox

Another paradox emerges when considering the trajectory of institutional participation. Since the end of 1999, the number of 13F filers has more than quadrupled—from 1,943 to approximately 8,862 13F filers as of Q1 2025. On its surface, this suggests a democratization of equity ownership, with more firms reporting holdings in public companies. However, this expansion in breadth has not translated into greater turnover. In fact, aggregate S&P 500 turnover has declined sharply over this period.

Breakdowns by filer type reveal that this growth has been driven by specific segments. Investment advisers, private wealth managers, and hedge fund managers represent the only categories that have each surpassed 1,000 13F filers in recent years.

• As of the end of the 1st quarter of 2025, there were approximately 4,958 investment advisers, 1,445 wealth managers, and 1,289 hedge fund managers registered as 13F filers.
• Other segments—including insurance, pensions, banks, and family offices—grew modestly but
  remain small contributors.

The growth of these leading categories speaks to their magnitude in the institutional ecosystem. Together, they account for the vast majority of the observed expansion in the 13F universe.

However, the disconnect between filer growth and declining turnover underscores a structural reality: despite broader participation, ownership and influence have become increasingly concentrated in the hands of a few dominant passive managers. The rise of smaller, lower-activity filers—many of whom operate passive or low-churn strategies—has contributed to a dilution of average turnover without increasing meaningful trading activity.

Observations

More Filers, Same Power Players: While more firms are reporting under 13F, actual market influence remains heavily concentrated in a small number of dominant institutions.

Passive Growth, Minimal Movement: Many of the new entrants represent passive or low-turnover strategies, contributing to the filer count but not significantly impacting trading volumes.

Few Firms Drive the Market: A handful of top-tier asset managers control the majority of assets and trading outcomes, while most 13F filers operate with limited market impact.

Implications Going Forward

Though not yet a wholesale reversal, recent upticks in turnover signal a potential return to portfolio-level decision-making among active shareholders. For public companies, this evolving environment underscores the importance of:

• Reassessing investor targeting strategies
• Preparing for greater variability in ownership
• Monitoring emerging themes that drive rotation

Since 2010, equity markets have been shaped by the rise of passive investing and waves of retail activity, leaving institutional turnover at historic lows. Now, with signs of active managers reengaging, a shift may be underway. Even a modest return to active decision-making could mark the start of a post-passive era. Investor relations teams should prepare for a more dynamic ownership landscape—one increasingly driven by fundamentals—and act accordingly.

In an increasingly complex and volatile market, public companies have, in recent years, faced a growing array of challenges from takeover bids and activist investors. While shareholder activism was once largely concentrated in the US, it has now become a global phenomenon, with companies around the world contending with activists and their diverse demands.

2024 was a particularly significant year for shareholder activism. According to Barclays, a total of 243 activist campaigns were launched globally – the highest number since 2018. The Asia-Pacific region saw a record 66 campaigns, surpassing Europe for the first time. In contrast, European activity declined by 26 percent year-on-year to 48 campaigns. In the US, campaign activity rose by 6 percent to 115 campaigns. However, in terms of campaigns globally, the US hosted just a 47 percent share in 2024, compared to 69 percent at its peak in 2015.

Consistent with historical patterns, there was a 67 percent surge in activity from the third to the fourth quarter, as activists typically intensify efforts during this period to align with US nomination windows, which open between December and February.

Barclays also reported a record number of activists launching campaigns in 2024, with 160 different investors involved, including 45 first-time activists – both all-time highs. Notably, first-time activists accounted for 18 percent of campaigns, surpassing major activists, who were responsible for just 17 percent, marking a record low share for the latter. This shift underscores the broadening of the activist landscape, as the strategy gains wider acceptance among institutional investors globally, and points to evolving norms in corporate governance and shareholder engagement. The increase in campaigns initiated by first-time activists also reflects a growing acceptance of activism in the market as a credible approach to generating long-term value.

As Stephen Glover, a partner at Gibson Dunn, points out, activists are now casting their nets wider. “Activist funds have become increasingly aggressive, and are now searching for targets not only in the US but also Europe and Asia,” he says. “No company is too large to be exempt from challenge, and large cap companies increasingly find themselves in the activists’ crosshairs. Although some industries, such as tech, media and retail, have drawn more activist attention than others, no economic sector is safe from challenge. The number of activist funds has continued to grow, and even campaigns launched by small funds have been able to get traction.

“Over the last year or two, the number of campaigns that focused on strategic or operational issues and advocate for management changes has increased. By contrast, there have been fewer M&A-focused campaigns, in part because the M&A markets have been less active,” he adds.

One of the most notable developments is the growing tendency for activists to go public early.

Evolving tactics and strategic shifts

The tactics and strategies employed by shareholder activists have evolved significantly in recent years, and companies must be aware of these changes to defend themselves effectively. What began in the 1980s as a brash and often combative movement led by so-called ‘corporate raiders’ has matured into a sophisticated, globally attuned and strategically agile force.

One of the most notable developments is the growing tendency for activists to go public early. “They will sometimes launch ‘sneak’ attacks in which they mount a public campaign without having first engaged in a dialogue with the target’s board and management team,” explains Mr Glover. “This change may be attributable in part to the increasing number of activist funds and the declining number of easy targets. For similar reasons, activist funds are more likely to work together or take aim at the same target at the same time than was the case in the past.”

As a result, settlements are now happening more quickly, with many deals being finalised even before any public disclosures are made. Additionally, activists have become more effective at engaging with target company shareholders, who are increasingly open to their arguments. They are also more adept at identifying strong board candidates.

The shift in activist behaviour and the rising number of campaigns are being driven by several factors, with M&A playing a central role. “M&A continues to be a primary catalyst for activist activity, with an expected increase in campaigns if M&A volumes rise in the latter half of 2025,” notes Peter Casey, president at Alliance Advisors. “Activists remain focused on strategic and operational enhancements, often pushing for leadership changes, including chief executive turnover. While corporate governance remains an important focus, stock underperformance relative to peers remains the principal driver of activist interventions, as it often signals mismanagement and an opportunity to generate returns. Activists target companies with operational inefficiencies, including high costs, ineffective supply chain and suboptimal capital allocation.

“Other focal points include weak board structures, excessive executive compensation and insufficient independent oversight. Activists also seek companies with unclear or poorly executed strategies, non-core assets or valuations that lag their intrinsic worth. In such cases, they frequently advocate for asset sales or spin-offs to unlock shareholder value,” he adds.

The landscape of shareholder activism has evolved considerably, with key developments shaping its trajectory. “Activists are increasingly targeting large-cap, high-profile companies, demonstrating a willingness to take on more significant challenges and allocate greater resources to their campaigns,” says Adam Riches, senior managing director (global) at Alliance Advisors. “As institutional investors and other stakeholders demand greater corporate accountability and transparency, activists are leveraging these expectations to align their agendas with traditional asset managers.

“Additionally, shareholder activism has become more globalised, with investors applying North American strategies and tactics in regions that were previously less receptive to activist interventions,” he adds.

Regulatory impact and developments

Recent regulatory changes – particularly the US Securities and Exchange Commission’s (SEC’s) universal proxy rule – have significantly reshaped the activist landscape. The rule allows shareholders to vote for a combination of nominees from both company and activist slates, rather than choosing one side entirely. “As a result, activists are now more emboldened to pursue board seats, increasing the frequency and success rate of campaigns,” notes Mr Riches.

Shareholders are no longer limited to voting exclusively for either all management or all activist nominees. Instead, they can select individual candidates. “This ability to pick and choose tilts the playing field somewhat in the activist’s favour, because they can attack individual management candidates who they believe are particularly vulnerable,” says Mr Glover.

The universal proxy card has also led to a rise in settlements, as companies face greater pressure to reach agreements with activists early. With shareholders now able to support a mix of nominees, the chances of activists winning board seats in contested votes have increased.

This shift has prompted more proxy contests focused on criticising individual directors, and has heightened the perception among companies that such contests are riskier than before. While the overall number of contested campaigns has not grown, the increase in settlements suggests companies are more inclined to avoid drawn-out battles.

Favourable rulings in Delaware — particularly regarding books and records requests under section 220 of the Delaware General Corporation Law — have further supported activists. However, recent legislative changes may limit the scope of these demands, potentially reducing this advantage.

In today’s evolving activist and regulatory environment, companies must respond with clarity, transparency and a well-defined strategy.

Identifying and addressing vulnerabilities

Given the rapid pace of change and the increasing globalisation of activist behaviours, companies must take proactive steps to identify potential vulnerabilities and pre-empt shareholder activism.

Mr Glover highlights several vulnerabilities that can make a company an attractive target for activists. If a company underperforms its peers – whether through weaker profitability, slimmer margins, or a lower share price – activists may argue that its strategy is flawed, operations need restructuring, or leadership should change. Underperforming or non-core business units can also be targeted, with activists pushing for divestitures or spin-offs. If the company appears to be a viable acquisition target, they may advocate for a sale. A strong balance sheet with excess cash or low leverage compared to peers can prompt calls for share buybacks or increased dividends. Additionally, boards with long-serving or underqualified directors are more vulnerable to demands for refreshment.

“A company preparing for the possibility of an activist challenge should engage in a candid self-evaluation process and take pre-emptive steps,” says Mr Glover. “For example, it can undertake its own board refreshment programme or make operational adjustments to improve margins and profitability. If the company has a plan for resolving strategic or operational problems that cannot be implemented immediately, it should be prepared to explain the plan and the proposed timetable. If the company believes that an apparent vulnerability is actually a strength, it should be prepared to explain why.”

According to Mr Casey, to mitigate the risk of activist intervention, companies should begin by monitoring performance metrics. “Companies should regularly track key performance indicators and stock performance relative to peers to detect early signs of underperformance. They must also assess board composition – ensuring the board has the necessary expertise, independence and diversity to drive long-term shareholder value. They should review governance and compensation policies, ensuring they align executive compensation structures and governance frameworks with shareholder expectations.

“The board must also be refreshed proactively in order to introduce new directors to enhance skills and address tenure-related concerns,” he continues. “Steps should also be taken to clarify strategic direction. To that end, companies should regularly evaluate and communicate corporate strategy and capital allocation decisions to investors. And finally, companies must maintain strong shareholder engagement. Establishing open lines of communication with institutional and retail investors will help to address concerns proactively and build trust.”

Strategic responses to activist campaigns

In today’s evolving activist and regulatory environment, companies must respond with clarity, transparency and a well-defined strategy.

Upon detecting activist interest, companies should immediately mobilise a core team – typically including legal counsel, a proxy solicitor and investor relations professionals. This group monitors shareholder movements, prepares public messaging and ensures the board can clearly articulate the company’s strategy. “Your company is under attack – this is not the time to practice ‘wait and see’ or penny-pinch,” suggests Mr Casey. “Get your team up and running day one.”

Waiting or cutting corners is risky. Ideally, companies should assemble a broader advisory team – including financial advisers, legal experts and public relations specialists – before any activist emerges. “The advisers can help the company identify vulnerabilities and prepare defences in advance,” says Mr Glover. “The more time the adviser team has, and the more thorough its discussion with the company, the better the company’s defence will be.”

A consistent and proactive communication plan is also essential. Companies should clearly convey their strategic vision and be ready to address potential activist concerns across various scenarios. This includes preparing tailored responses and designating one or two spokespersons to ensure a unified message. Engagement should extend beyond shareholders to include employees, customers and suppliers, building broader support and reinforcing confidence in the company’s direction.

Listening to activists can offer valuable insight into potential public campaigns and help shape a more effective response. Constructive dialogue may lead to mutually beneficial outcomes and reduce the risk of prolonged disputes. “Ultimately, however, companies must be prepared for a proxy fight,” says Mr Casey. “Even if the goal is an amicable resolution, companies should be ready to defend their strategy in the event of a shareholder vote.”

Companies should remain open to valid feedback while defending their strategy. Demonstrating a willingness to engage in good faith – especially in the early stages – can strengthen credibility with shareholders. If the company has a sound plan to address perceived issues, it should be prepared to explain it clearly and confidently. “The company may be able to persuade the activist that the problems it has identified are not really problems, or that the company has a well-developed, effective plan to solve those problems,” says Mr Glover. “At least in the early stages, before a proxy contest has started, it is important not to be too combative.”

The future of shareholder activism

Looking ahead, shareholder activism is expected to intensify as investors continue to scrutinise corporate strategy and performance. “Key trends will include an increased focus on capital allocation, with activists challenging inefficient capital deployment and holding boards accountable for underperformance,” predicts Mr Riches. “Likewise, activists will demand greater alignment between corporate strategy and shareholder interests, driving changes in leadership and business direction. As shareholder rights improve in various markets, activism will continue to gain traction in regions where investors have historically been less vocal.

“Overall, companies should anticipate a more sophisticated and globally interconnected activist landscape, requiring proactive governance, clear strategic communication and ongoing engagement with stakeholders to mitigate risk and foster long-term value creation,” he adds.

It is increasingly evident that activists will remain a powerful force in the marketplace for the foreseeable future. Companies with underperforming stock, non-core business units, excess cash, weak management teams or entrenched directors will continue to face significant pressure. However, by taking proactive and pre-emptive measures – particularly in relation to communication and stakeholder engagement – companies will be better positioned to deter activist campaigns and protect long-term shareholder value.

In 2025, ESG-related regulation is no longer a distant possibility, it’s a constantly shifting reality. While some jurisdictions have scaled back or delayed key initiatives, others are moving forward decisively. The result is a patchwork of evolving obligations that feel both urgent and unclear, posing a challenge for companies as they seek to understand and prioritize key sustainability-related efforts.

One of the most notable developments in the EU has been the adoption of the Omnibus Directive, which significantly revised the implementation timelines and scope of several cornerstone ESG regulations. The Corporate Sustainability Reporting Directive (CSRD), once poised to bring an estimated 50,000 companies under mandatory reporting obligations, has had its scope reduced by approximately 80%, limiting coverage to a smaller cohort of large and listed companies. Similarly, the Corporate Sustainability Due Diligence Directive (CSDDD) has been diluted in scope and delayed in application, with thresholds raised and civil liability provisions softened to secure political consensus. Newly proposed changes to the CSRD and CSDDD could result in even further reductions in scope.

Despite these changes, the EU continues to set the global benchmark for ESG regulation. While its applicability has been reduced to now exempt 90% of importers, the Carbon Border Adjustment Mechanism (CBAM) entered its transitional phase in 2023 and will expand into full operational mode by 2026, signaling the EU’s commitment to embed climate considerations into trade and competition policy. The European Sustainability Reporting Standards (ESRS), while softened in their application, remain in force and will continue to shape disclosure practices far beyond Europe’s borders.

Investors remain committed to sustainable investment, despite slowing regulatory progress and geopolitical developments. Only 3% globally report that they are reducing their ESG objectives, and many remain committed to imposing specific expectations on portfolio companies. Norway’s Norges Bank Investment Management (NBIM), the world’s largest sovereign wealth fund, reaffirmed in its 2025 Climate Action Plan that it expects portfolio companies to publish climate transition plans, set science-based targets, and disclose in line with the TCFD and ISSB frameworks. Similar expectations are being echoed by BlackRock, Legal & General, and other institutional investors, many of whom are shifting focus from climate policy commitments to tangible emissions reductions and capital allocation alignment.

In North America, the regulatory trajectory is more fragmented. Canada’s Canadian Securities Administrators (CSA) surprised many by pausing its long-anticipated climate disclosure rules in April 2025, citing the need to align with evolving global standards. The move reflects a broader recalibration amid political pushback and implementation concerns, particularly for smaller issuers.

In the U.S., the Securities and Exchange Commission’s (SEC) Climate Disclosure Rule, finalized in March 2024, is facing significant legal challenges and is no longer being defended by the Commission in court. The future of federal climate-related disclosure in the U.S. is now highly uncertain. However, this federal stall is not halting progress across the board. California has emerged as a regulatory counterweight, with landmark laws such as SB 253 (Climate Corporate Data Accountability Act) and SB 261 (Climate-Related Financial Risk Disclosure Act) still moving forward. These rules impose Scope 1–3 emissions disclosures and climate risk reporting requirements on large public and private companies operating in the state, reinforcing California’s leadership in subnational climate governance.

Globally, other jurisdictions continue to advance ESG reporting mandates. The International Sustainability Standards Board (ISSB) standards are gaining traction as the de facto global baseline, with 36 jurisdictions having adopted, used, or introduced the standards into their frameworks. Countries like the UK, Australia, Singapore, and Nigeria have announcing phased adoption plans through 2026 and beyond. Meanwhile, India, South Korea, and Brazil are exploring mandatory sustainability reporting frameworks that blend ISSB elements with local priorities.

When taken at face value, the global regulatory environment may appear uneven, but the long-term direction of travel is clear: disclosure expectations are rising, investor scrutiny is intensifying, and regulatory complexity is growing. While the pace and stringency of ESG mandates may ebb and flow, the strategic imperative for companies remains unchanged.

Staying Ahead of the Curve

Companies that view ESG regulation as a compliance exercise risk falling behind. Those that take a proactive stance—embedding materiality assessments, scenario analysis, climate governance, and credible transition plans into their core strategy—will be best positioned to withstand future regulatory shocks and stakeholder pressure. In particular, companies should:

• Track regulatory divergence across key markets and prepare for multi-jurisdictional compliance.
• Prioritize alignment with global baseline frameworks (ISSB, TCFD, GRI) to future-proof disclosures.
• Strengthen board oversight and cross-functional ESG governance structures.
• Engage early with investors and stakeholders to understand their evolving expectations.

In this volatile and evolving environment, agility and ambition will be the defining traits of ESG leaders. Even as regulation shifts, the message from markets, regulators, and society is consistent: sustainability performance is no longer optional, but integral to long-term value creation.

Retail shareholder engagement has undergone a fundamental transformation over the past decade. What was once a largely transactional, vote-focused process has evolved into a more dynamic and transparent partnership—one that offers clients visibility into every phase of the engagement lifecycle.

Transparency has become a core expectation,” says Gina Balderas, Senior Vice President of Operations, Retail Engagement. “It’s no longer enough to share final campaign results. Clients want to understand how outreach is executed from start to finish, with clear insights into strategy, timing, and ongoing performance.

This evolution aligns with broader shifts in corporate governance and investor relations, where accountability, real-time communication, and data-driven transparency have become essential components of trust and credibility.

From Transactional to Strategic

Historically, retail engagement was treated as a one-dimensional service aimed at driving shareholder participation through mailings, call centers, and—more recently—digital campaigns. While success was measured by turnout, there was limited visibility into how campaigns unfolded behind the scenes.

The COVID-19 pandemic marked a turning point. Faced with increased uncertainty, companies and investors required more frequent, real-time updates. Retail engagement providers began to evolve their models, moving beyond basic reporting to offer comprehensive, step-by-step transparency throughout the campaign lifecycle.

“Our clients expect to know who we’re contacting, when outreach is happening, and how we’re adapting tactics in real time based on shareholder response,” Balderas explains. “It’s a far more collaborative and insight-driven process than ever before.”

Transparency as a Trust-Building Imperative

Today, transparency is not just a value-add—it’s a strategic imperative. By sharing detailed engagement plans, progress metrics, and tactical adjustments, firms not only reinforce their commitment to results but also position themselves as trusted advisors.

Open communication allows clients to understand the nuances of shareholder behavior and the factors influencing campaign performance. For instance, fluctuating response rates driven by market volatility or voter apathy can be contextualized, enabling more informed and constructive decision-making.

“When we bring clients into the process early and maintain consistent communication, we strengthen the relationship and enhance the campaign’s effectiveness,” Balderas notes.

Key Elements of a Transparent Engagement Strategy

Modern retail engagement strategies now include:

• Pre-campaign strategy briefings, outlining planned outreach by channel, demographic focus, and timeline
• Ongoing performance updates, including contact rates, engagement metrics, and behavioral insights
• Real-time tactical adjustments, shared with clients as campaigns evolve
• Post-campaign analysis, identifying successes, challenges, and optimization opportunities for future initiatives

This level of visibility supports not only campaign execution but also broader governance and investor relations strategies, enabling clients to make more informed decisions in future engagement cycles.

Competitive Advantage Through Transparency

In a highly competitive landscape, firms that prioritize transparency stand out. Clients increasingly favor partners who provide actionable insights and strategic guidance—not just operational support.

Transparency enhances both trust and performance,” Balderas affirms. “It transforms the nature of the engagement from a service transaction into a consultative relationship.

Transparent practices also resonate with shareholders. When retail investors understand the process and feel respected throughout, they are more likely to participate—not only in the current campaign, but in future engagements as well.

The Road Ahead

The demand for transparency will continue to grow. As shareholder bases become more diverse and campaigns more complex, companies must invest in tools, processes, and talent that enable real-time, transparent communication at every stage.

Retail engagement is no longer a black box,” Balderas concludes. “It’s a strategic process built on transparency, insight, and collaboration. Firms that embrace this reality will lead the next generation of shareholder engagement.

In today’s environment, transparency is more than a best practice—it is a defining characteristic of successful engagement. Companies that prioritize open communication, real-time insight, and client collaboration will foster deeper relationships, inspire greater shareholder trust, and position themselves for sustained success.

Retail shareholder engagement is undergoing a significant transformation. Once dominated by traditional outreach methods such as phone calls and direct mail, the landscape is now rapidly shifting toward digital-first strategies. This evolution is driven by changing investor expectations, technological innovation, and the demand for greater efficiency and measurable results.

“We’ve seen response rates to digital outreach increase from 1–3% a few years ago to 6–10% today, depending on the shareholder demographic,” notes Gina Balderas, Senior Vice President of Operations, Retail Engagement. “That kind of growth reflects a clear change in how shareholders want to be reached.”

Why Digital Engagement is Gaining Traction

At the core of this shift is a generational and sectoral change in shareholder composition. Industries such as biotechnology and technology often attract younger, digitally native investors who prefer mobile-first communication and expect seamless, real-time interactions. For these groups, email and text messaging have become the most effective touchpoints, resulting in faster responses and higher engagement levels.

“Biotech and tech clients typically have shareholder bases with an average age under 50,” Gina explains. “These investors are highly responsive to digital outreach and expect that kind of engagement.”

However, the transition to digital is not uniform across all industries. Sectors like utilities, energy, and financial services—with shareholder bases that skew older—continue to show strong results from more traditional channels such as phone and mail.

The Power of a Multi-Channel Strategy

Despite the growing dominance of digital tools, successful retail engagement still depends on a comprehensive, multi-channel approach. Companies must blend email, SMS, phone outreach, and physical mail to reach a diverse investor base effectively.

“For companies with mixed demographics, a one-size-fits-all strategy is ineffective,” Gina emphasizes. “We analyze shareholder composition closely and tailor outreach strategies to ensure broad, inclusive engagement.”

This customized approach is yielding measurable results. In a recent campaign led by Gina’s team, early digital outreach generated initial momentum, while subsequent phone calls helped engage harder-to-reach shareholders. The result: a 15% increase in overall participation compared to previous years.

Real-Time Insights, Real-World Impact

One of the key advantages of digital-first engagement is the ability to monitor and respond to campaign performance in real time. Unlike traditional methods, digital platforms allow for tracking metrics such as open rates, click-throughs, and response patterns within hours of launch.

“We can identify which messages are resonating—and where gaps exist—within 24 to 48 hours,” says Gina. “This allows us to make data-driven adjustments mid-campaign, ultimately improving outcomes.”

This agility is especially valuable in high-stakes proxy campaigns, where timing and precision are critical to securing shareholder support.

Strategic Imperatives for the Digital Age

To remain effective in this evolving environment, companies must adapt their retail engagement strategies by:

• Investing in scalable and compliant digital communication tools (e.g., email and SMS)
• Segmenting shareholder lists based on demographic and behavioral insights
• Integrating digital outreach with strategic phone and mail follow-ups
• Continuously monitoring and optimizing campaign performance

“Digital-first engagement is clearly the way forward,” Gina concludes. “But the most successful campaigns combine the precision of digital tools with the trust-building power of human interaction.”

Looking Ahead

As artificial intelligence and machine learning continue to enhance engagement platforms, companies will gain even greater capabilities for targeting, personalization, and campaign optimization. These technologies promise to make outreach more efficient and relevant than ever before.

Yet, even in a highly digital environment, the human element remains indispensable. For many shareholders—particularly older investors—voice communication provides the clarity and reassurance needed to drive meaningful engagement.

In a rapidly shifting landscape, organizations that embrace digital-first strategies while maintaining a thoughtful, multi-channel approach will be best positioned to engage their retail shareholders, maximize participation, and succeed in both proxy contests and long-term governance initiatives.

Through the first quarter of 2025, the S&P Composite 1500 / Energy Index has reached heights only achieved twice (in 2008 and 2014), leading investors to believe that valuations of the Energy sector have pushed into over-valued territory. The S&P Energy Select Sector Index has similarly reached heights only broached twice before and so far this year, energy stocks lead all S&P 500 sectors. Understanding what has underpinned this performance helps explain the drivers of smart-money sentiment. While prices were relatively flat for all but one of the key energy products in 2025’s first quarter, only natural gas prices that have risen, rallying nearly 25%.¹ Since hitting $80 a barrel on January 15, West Texas Intermediate crude oil has fallen by nearly 30%, hitting sub $57 just recently. This scenario played nicely into the broader market sentiment that saw many factors create a “risk-off” environment, prompting a rotation out of growth-oriented sectors into more defensive and/or value-focused areas.

With this backdrop in mind, Alliance Advisors conducted shareholder analysis to see which investors were buttressing the sector’s performance. We reviewed mutual fund holdings within our innovative investor intelligence platform, Invictus®, to understand which mutual funds were the most bullish supporters of the Energy Minerals sector, and the results proved interesting. Our initial screen was for actively managed mutual funds based in the United States that have been increasing their exposure to Energy Minerals sector stocks by more than $5 million. We then filtered out any funds that did not hold at least five (5) Energy Minerals sector stocks so as to remove any anomalous outliers. When sorting this list by the percentage of purchased to owned investments, a clear trend emerged. The most bullish funds in the Energy Minerals sector were not industry funds (Oil, Gas, Commodities, etc), but rather Value focused funds followed by Global funds. Leading the list was the Allspring Large Company Value Fund managed by Ryan Brown and Harin de Silva. Underpinning the fund’s sector investment theme was a rotation into mega cap names (ConocoPhillips, EOG Resources, and Exxon Mobil) at the expense of mid- and large-cap names (Ovintiv, National Fuel Gas, and Diamondback Energy).

Similarly, the Avantis US Large Cap Value Fund managed by Eli Salzmann and David Levine, the second largest percentage increase in the sector, was also seen rotating into meg cap sector names (Chevron, Exxon Mobil, ConocoPhillips and EOG Resources) at the expense of smaller capitalization companies (HF Sinclair, PBF Energy, Civitas Resources, SM Energy, and APA Corporation). Helping Chevron during this period was the US President weighing a plan to extend Chevron’s license to pump oil in Venezuela, as per Reuters.

The Neuberger Berman Large Cap Value Fund, the third largest increase with a dedicated value focus, seemed to apply a comparable approach by heavily increasing exposure to EOG Resources and Chevron, though instead of sourcing capital from smaller market capitalization companies chose to rotate within the mega cap space by reducing exposure to Exxon Mobil and Phillips 66. In the fund’s April commentary, fund manager David Levine wrote, “From a sector allocation standpoint, the Fund benefited from an overweight positioning in energy and an underweight positioning in information technology”.

In shifting to the Global funds, the most bullish fund was the BlackRock Advantage International Fund managed by Raffaele Savi, Kevin Franklin and Richard Mathieson. This fund mirrored the earlier trends of increasing exposure to mega cap names, though those outside of the United States (Shell PLC, Equinor ASA, and TotalEnergies SE), each within the Integrated Oil industry. When highlighting the contributing factors to performance, the fund’s most recently commentary stated,

Fundamental quality measures focused on sustainability of earnings and penalizing companies with high wage pressures were the top contributors… Collectively, stock selection was strong across Europe through a preference for domestic financials and defense stocks over those reliant on global trade.

Another globally-focused fund exhibiting bullish sentiment in the Energy Minerals sector was the Kopernik Global All Cap Fund managed by Alissa Corcoran and Dave Iben. This fund made a rotation into North America with its three largest purchases in Canada’s MEG Energy, US-based Expand Energy and Range Resources. This trend follows in line with the fund’s driving principle that being an opportunistic portfolio will have a low correlation to other managers. The fund’s primary philosophy and process is designed to capitalize on market dislocations based on fear and greed.

The period for which these holdings analysis encompassed was historically unique, as the overarching influence on investor sentiment was the US President’s ever-changing tariff strategy. Crude benchmarks suffered from demand concerns related to these tariff concerns. After providing initial headwinds, a decision to pause tariffs on non-retaliatory nations for 90 days and lowered reciprocal tariffs to 10% provided some tailwinds. Also, tanker data had Russian, Iranian and Venezuelan crude exports all rebounding in March, despite US sanction threats.

For corporates looking to influence their shareholder constituents, Alliance’s team of market experts can help you understand shifting market dynamics to ensure your time is spent with the “right” shareholders instead of the traditional peer-focused investors.

¹ Energy Information Administration