ESG Reporting Landscape

The ESG reporting landscape is undergoing rapid transformation, with regulatory shifts, evolving standards, and new stakeholder expectations driving both opportunities and challenges for organizations worldwide.

The demand for consistent, comparable, and decision-useful sustainability information remains strong, driving voluntary standards toward greater harmonization and jurisdictions toward stronger mandatory frameworks.

Global Snapshot

United States

• Shift from voluntary to mandatory: While the previously adopted SEC climate disclosure rule has halted, regulations at the state level continue moving toward mandatory disclosures for climate-related risks and greenhouse gas (GHG) emissions with reporting in California beginning in January 2026.
• State-by-state action: In California, SB 253 and SB 261 mandate Scope 1, 2, and (over time) 3 GHG reporting, plus climate risk disclosure for companies with annual revenues in the state exceeding a set amount. Other states, including New York, New Jersey, Illinois, Washington, Colorado are following California’s lead by introducing similar climate-related active or pending legislation, with varied revenue thresholds and reporting timelines.

Practical focus for companies: Companies increasingly align with the ISSB and TCFD frameworks for climate and risk disclosures. Investor language is moving away from “ESG” toward “material sustainability risks and opportunities.

Canada

• Regulatory pause: Canadian Securities Administrators (CSA) have delayed implementing new mandatory climate-related disclosure rules as of April 2025, due to market uncertainty.
• ISSB-aligned standards: The Canadian Sustainability Standards Board (CSSB) released voluntary standards (CSDS 2, December 2024) with expectation of future mandatory adoption.

Practical focus for companies: Use the current “pause” to prepare, perform dry runs, and plan for rapid regulatory return. Reporting remains critical for market access and investor confidence.

European Union (EU)

• CSRD & ESRS changes: The Corporate Sustainability Reporting Directive (CSRD) expands detailed sustainability reporting—now being streamlined:
  • Omnibus Package (2025): Raises company size thresholds, reduces scope by up to 80%.
  • Timeline extended: Reporting delayed by two years for many, but “Wave 1” filers already issued first reports.
• Trends in reports: Key findings from preliminary reports published show that Reports vary widely in length and style but follow a relatively consistent ESRS-based structure, with comparability strong at a high level but weak at the datapoint level. Most companies focus on a few core topical standards—climate change, workforce, and governance—while rarely reporting on less material sub-topics.

Practical focus for companies: Early lessons encourage targeted materiality, through double materiality assessments, and robust stakeholder engagement with investors and across the entire value chain.

Other Notable Jurisdictions

New Zealand

Mandatory climate disclosure: Under the Financial Sector (Climate-related Disclosures and Other Matters) Amendment Act 2021, listed issuers, large banks, insurers, and investment managers must disclose climate risks and opportunities in annual reports. Based on the NZ CS 1, CS 2, and CS 3 standards, which are closely aligned with TCFD and moving toward ISSB alignment, the purpose is to support capital allocation to low-emissions, climate-resilient activities and attract climate-aware global investors. 2024 marked the first year of reporting by issuers, but the External Reporting Board (XRB) is consulting on further timeline extensions for Scope 3 and financial impact disclosures.

Australia

AASB S2 incoming: The Australian Accounting Standards Board will require listed and large companies to disclose climate-related financial risks and GHG emissions (Scope 1, 2, and regulated Scope 3). The final AASB S2 standard is planned for application starting in 2026, following ISSB/TCFD structure.

Hong Kong

IFRS S1/S2 adoption: The HKEX (Hong Kong Exchanges and Clearing Limited) is set to adopt IFRS S2 for climate-related disclosures from January 2026. Listed entities must report on governance, strategy, risk management, metrics, and targets in line with international climate standards.

Mexico

Sustainability reporting development: As of 2025, the regulatory framework incorporates ISSB-based requirements and GHG emission disclosures for large entities and public companies. Mexico is developing these sustainability standards to increase international consistency, transparency, and market attractiveness.

Voluntary Standards and Framework Consolidation

The voluntary reporting space is also evolving, primarily under the purview of the International Sustainability Standards Board (ISSB). ISSB, under the IFRS Foundation, now provides a unified baseline, with widespread adoption supported by technical mapping and collaboration across standard setters.

Multiple frameworks, including SASB, CDSB, TCFD, and GRI are either consolidating under ISSB or collaborating with the organization to standardize reporting, promote interoperability of standards, and create a harmonized global approach. Industry initiatives, such as partnerships between the GHG Protocol and ISO, further demonstrate momentum toward simplified and streamlined emissions accounting, benefiting companies seeking efficiency and comparability across jurisdictions.

Key Trends and Reporting Strategies

With this evolving reporting landscape, organizations should consider several key trends when developing or adjusting their sustainability reporting approach:

• The need for quality data, strong governance, and clear materiality prioritization
• A growing shift in narrative, away from broad ESG terminology to focused discussions of specific material sustainability risks and opportunities
• A growing emphasis on making intentional, well-substantiated commitments and disclosures to enhance transparency, avoid greenwashing, and build stakeholder trust amid increased regulatory scrutiny in Canada and beyond
• Rising demand for machine-readable, structured, concise, and impactful sustainability reports, less check the-box, more targeted narratives plus infographics and clear metrics

Building Your Sustainability Reporting Approach

Understand Expectations or Requirements: With so many evolving standards, frameworks, and regulations, it can be challenging to know what to report, or what constitutes best practice. Companies should dedicate time upfront to identify required disclosures and determine internal goals for reporting, such as defining the target audience, purpose, and communication priorities. Clarity at this stage provides efficiency later, ensures compliance with mandatory requirements, and helps position the report as a meaningful tool rather than a compliance-only exercise.

Build Strong Engagement and Collaboration: It’s critical to understand the needs of stakeholders in order to address them. Effective sustainability reporting hinges on broad engagement across the organization and with external stakeholders. Engaging with your shareholders year-round, not just ahead of the annual meeting, is a meaningful way to gauge their priorities and expectations. The same goes for other external stakeholders, such as customers, who are increasingly seeking information around companies’ environmental and social practices. Internally, engaging cross-functional teams (finance, operations, HR, procurement) is paramount to successful and effective reporting.

Position Sustainability Reporting as Strategic Communication: Finally, while there are reporting regulations evolving globally and there is an element of compliance that has been introduced into reporting, companies should not let this alone drive their reporting approach. Investors, especially shareholders, want to see how sustainability aligns with overall corporate strategy and growth. Sustainability reporting should address key points around risk, opportunity, and long-term value creation. Just checking the box on reporting is not an effective use of your company’s time and is not effective in addressing the needs of stakeholders—use reporting as an opportunity to tell your company’s story.

Streamline Your Reporting with

Whether reporting is mandatory or voluntary, clear, intentional sustainability disclosures drive value creation, strengthen stakeholder trust, and position organizations for long-term success.

Alliance Advisors provides tailored, year-round support to enable companies to strengthen and streamline their sustainability reporting and communication. With Invictus Align, backed by our expert advisory support, companies are able to:

• Map regulatory requirements across all jurisdictions of operation to identify relevant disclosure topics
• Create audit-ready systems of record that ensure transparency, data integrity, and preparedness for internal and external assurance.
• Manage workflows and disclosure deadlines by assigning clear data and reporting responsibilities across teams.
• Facilitate cross-functional collaboration by centralizing reporting activities into a single platform, connecting finance, sustainability, operations, legal, and other teams for seamless engagement.
• Emphasize strategic communication of material risks, focused transparency, and credible disclosures to address investor expectations and avoid pitfalls such as greenwashing.

Start today to prepare for evolving regulatory requirements and investor expectations, ensuring your sustainability story is clear, credible, and effectively drives long-term value for your business and stakeholders.

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.

Executive Summary

In 2025, Canada’s corporate governance landscape will be shaped by a combination of evolving disclosure frameworks, a tightening global regulatory environment, and the increasing influence of geopolitical and technological factors. Board diversity expectations, cyber risk oversight, and AI governance are rising as defining pillars of Canadian governance. While ISS and Glass Lewis only implemented slight policy revisions, investor scrutiny remains high across directorship standards, executive pay, and ESG oversight. Data from Diligent’s voting platform shows that remuneration proposals saw the widest variation in support, reflecting intensified investor focus on compensation governance. Meanwhile, the political divergence between the U.S. and Canada over DEI (Diversity, Equity, and Inclusion) policies has generated tension, especially for Canadian issuers with dual listings.

Further complexity has emerged from new SEC rules in the U.S., leading to more cautious engagement strategies by major investors. Meanwhile, Canada’s regulatory bodies, notably the OSC (Ontario Securities Commission) and CSA (Canadian Securities Administrators), are enhancing their commitment to transparency and board accountability, particularly on AI and sustainability matters. Notably, activism surged in Canada this year, with TD Bank’s AGM drawing national attention over governance failures linked to money laundering investigations. Overall, as 2025 unfolds, Canadian companies must balance a maturing principles-based governance regime with increasingly rule-driven global investor expectations.

AGM Voting Trends

Diligent’s aggregated voting data for 2025 paints a nuanced picture of investor sentiment across governance categories:

While director elections and committee-related proposals saw strong average support, low-end figures suggest isolated opposition to certain board members or audit practices. The remuneration category, however, displayed both the highest volatility and lowest minimum support, underlining investor concerns around pay-performance alignment and equity-based incentives.

Proxy Voting Guidance & AI Oversight

Glass Lewis and ISS released modest revisions to their 2025 Canadian proxy policies. Both emphasized the need for increased transparency in board oversight of emerging risks, particularly around AI and cyber governance. Glass Lewis introduced formal expectations for companies developing or using AI to disclose oversight structures, ethical frameworks, and board expertise in the area. It warned that directors could be held accountable where inadequate AI governance leads to shareholder harm.

ISS reaffirmed its stance on director independence, committee composition, and board refreshment, while flagging climate accountability and ESG-linked pay as growing areas of focus. While neither advisor introduced significant overhauls, the messaging was clear: scrutiny around board capabilities and ethical tech use is intensifying.

Political & Regulatory Context: DEI, Engagement & Diverging Jurisdictions

The U.S. political shift following President Trump’s return to office has cast a shadow on corporate governance norms in North America. His January 2025 executive order to dismantle DEI programs prompted ISS to suspend enforcement of board diversity guidelines for U.S. companies. Glass Lewis, conversely, upheld its DEI commitments. This divergence places Canadian companies with U.S. listings in a precarious position, as they face conflicting stewardship expectations.

Domestically, the CSA and OSC remain committed to progressive disclosure standards. Finalized diversity amendments are expected to mandate expanded reporting on board and executive composition, covering Indigenous peoples, racial minorities, and LGBTQ2SI+ groups. These reforms reflect a continuation of Canada’s principles-based, comply-or-explain approach.

New SEC rules enacted in February 2025 added further complexity. Under these changes, even passive investor communications may be construed as efforts to influence corporate control. This has led large institutional investors such as BlackRock and State Street to adopt a “listen-only” posture in engagements, effectively muting shareholder dialogue during the proxy season.

Shareholder Activism & Governance Flashpoints

Activist campaigns surged in Canada throughout 2025, with 49 tracked between January to mid-June 2025. The most high-profile case involved Toronto-Dominion Bank (TD). The bank’s AGM featured 11 shareholder proposals, many focusing on governance and oversight weaknesses stemming from ongoing anti-money laundering (AML) investigations. Investor concerns included board accountability, executive risk oversight, and transparency on regulatory compliance. The event has become a bellwether for broader governance expectations across the financial sector.

Elsewhere, the rise in activism reflects growing investor impatience with legacy board structures, insufficient ESG responsiveness, and inconsistent remuneration practices. Proxy advisors and institutional shareholders are placing greater emphasis on board effectiveness, risk oversight, and responsiveness to prior vote outcomes.

Conclusion

Canada enters the second half of 2025 with a strong, principles-based governance model, but one now navigating global crosswinds. Board diversity, ESG stewardship, cyber resilience, and AI governance have emerged as core focal points. While ISS and Glass Lewis continue to calibrate expectations, institutional investors are raising the bar. Companies must ensure they are not only compliant but genuinely responsive to shifting stakeholder concerns. Going into 2026, boards are encouraged to deepen expertise in ethical technology use, enhance disclosure practices, and align remuneration with both financial and non-financial metrics. In a world of regulatory fragmentation and rising activism, agility and transparency will define good governance.

Overview

In a year that opened with trade uncertainty, inflation jitters and market volatility, much of the dust has settled and given way to greater economic clarity, resilient earnings growth and record market highs.  The midpoint of the year is ushering in a new phase of economic transformation with the establishment of a stablecoin payment system under the GENIUS Act and a national discourse on the Federal Reserve System.

Underpinning this process has been a shift to a more business-friendly regulatory framework, which included the de-escalation of environmental, social and governance (ESG) agendas, particularly climate change and diversity, equity and inclusion (DEI) initiatives.  For companies, this resulted in fewer and less successful demands from ESG adherents during the 2025 proxy season, other than those relating to core corporate governance principles.

Some of the trends observed during this year’s annual meetings include the following:

• Scale-back of shareholder proposals: The volume of shareholder proposal filings through June (841) subsided substantially after reaching its highest level last year (1,034) since 2015 (see Tables 1 and 2).   Submissions of environmental and social (E&S) resolutions were down by nearly a quarter from last year’s peak as proponents awaited an expected course change by the incoming Trump administration and the GOP-led SEC.  Omissions also ran higher than last year–24% of all filings compared to 14% in 2024—due in part to new SEC guidance that facilitated the exclusion of proposals that focus on significant social policy issues.  Given the more favorable landscape for no-action challenges, filings of E&S resolutions are likely to remain suppressed going forward.
• More companies relented on governance measures: The volume of governance filings remained fairly constant from last year (302 versus 318 in 2024) due in large part to the persistence of corporate gadfly John Chevedden and his affiliates who sponsored over half of them.  Standard-themed governance measures amassed 45 majority votes and in nearly two dozen cases the boards chose not to oppose the resolutions.  Another 40 companies countered the shareholder resolutions with their own charter and bylaw amendments.
• E&S support contracted further: For a fourth consecutive year, support for E&S resolutions lost ground, not only from investors but also from proxy advisors, particularly Institutional Shareholder Services (ISS), which backed a mere 12% of them compared to over half in 2024 (see Table 3). Excluding proposals from conservative (“anti-ESG”) investors, which typically receive marginal support, average E&S votes reached only 14.8%, down from 19.7% in 2024.  Only 14 proposals attracted over 30% support, 11 of which were on political contributions including five majorities.
• ESG crossfire intensified: Conservative proponents produced 129 filings this season—up slightly from 120 in 2024—with over 80% devoted to social issues, particularly DEI themes.  Ten companies faced competing pro- and anti-ESG resolutions on DEI, climate change and plastics recycling.   Notwithstanding the high proposal volume, conservatives’ E&S initiatives continued to attract only marginal support—2.2% on average—though they recorded several standout votes on human rights due to rare support from the proxy advisors.
• Executive compensation and director approvals remained solid: Say on pay (SOP) voting patterns were essentially unchanged from the first half of 2024 in terms of average support (90.5%), the rate of failures (1.3%), and the proportion receiving a negative ISS recommendation (12.3%).  Directors also elicited strong support with 17% fewer facing high opposition votes (over 30%) than in the 2024 proxy season due in part to changes in investor policies on board diversity, overboarding and director accountability on E&S matters.  A number of hedge funds also shifted gears by passing on full-scale proxy fights in favor of “vote no” campaigns, which generated some headway on desired leadership changes.
• More competition in state migrations: Reincorporation activity became livelier with Delaware, Texas and Nevada vying for business by implementing major amendments to their respective corporation laws.  Although Nevada was the preferred destination for “DExits,” Texas made the most innovative changes to its statutes, including allowing companies to impose meaningful ownership requirements for shareholders to submit proposals and mandating a disclosure regime for proxy advisors when their voting advice on Texas companies is based on non-financial factors or conflicts with the board’s recommendations.

This report examines some of the predominant themes, voting results and trends at all U.S. public company annual meetings during the first half of 2025. Note that shareholder proposal votes are based on “for” and “against” votes and exclude abstentions.  Shareholder proposal submissions are estimates based on SEC filings, proponent websites and media reports.   Proxy advisor recommendations are derived from ISS Voting Analytics and Diligent Market Intelligence.

Table 1: Shareholder Proposal Voting Trends

*Of the 2025 majority votes, 22 governance proposals were not opposed by the board.
Of the 2024 majority votes, 15 of the governance proposals were not opposed by the board.
Of the 2023 majority votes, five of the governance proposals and one of the E&S proposals were not opposed by the board.

Table 2: Top Shareholder Proposal Filings: 2025 (as of June 30) – 2024 (full year)

*These proposals were filed by Chris Mueller and his affiliates regarding companies’ direct stock purchase plans offered through their transfer agent, Computershare. All were omitted or withdrawn due to company challenges on ordinary business or procedural defect grounds.

Table 3: ISS and Glass Lewis Support for Shareholder Proposals

Regulatory Backdrop

During its first six months, the Trump administration took swift action to revitalize and modernize the economy and position the U.S. as a leader in technological innovation which, by mid-July, culminated in “Crypto Week” legislation on Capitol Hill and the unveiling of an artificial intelligence (AI) action plan.¹2  These directives were backed up with enforcement actions, such as Federal Communications Commission (FCC) investigations into the DEI practices of several media and wireless companies, particularly those awaiting regulatory approval of mergers and acquisitions.

Other EOs reasserted American energy independence by removing impediments to domestic energy production and rolling back the Biden administration’s climate regulations, including withdrawing the U.S. from the Paris Agreement and other climate-related financial commitments.  A follow-on EO issued in April took aim at state-level climate laws and litigation designed to hold fossil fuel companies financially responsible for alleged harms caused by climate change.³  The SEC also signaled its probable intent to roll back the 2024 climate disclosure rules by ending it defense of them against legal challenges.

Other SEC actions had a direct bearing on the 2025 proxy season.  In February, the Division of Corporation Finance took immediate steps to restore balance to the no-action process and address longstanding complaints from issuers and institutional investors regarding the rising volume of shareholder proposals and the lower quality of many, including being overly prescriptive, substantially implemented or lacking economic merit.  New interpretative guidance—Staff Legal Bulletin (SLB) 14M—essentially rescinded Biden-era guidance (SLB 14L) that had made it harder for companies to exclude shareholder proposals that raised broad societal concerns.  The SEC additionally updated its guidance on Regulation 13D-G beneficial ownership reporting to discourage large investors from being coercive in their engagements

with issuers, such as conditioning their support of board nominees on companies adhering to their policies on governance, compensation and E&S matters.

The result was a noticeable retreat by investors and proxy advisors from advancing ESG agendas this season.  To avoid triggering Schedule 13D requirements, large asset managers shifted to engagement “lite” discussions, purged or softened references to DEI and ESG in their voting and stewardship guidelines, and limited their issuance of periodic vote bulletins during proxy season.  Meanwhile, the proxy advisors scrambled to adjust their quota-style board diversity policies: ISS suspended the application of its policy and Glass Lewis offered its clients an alternative to its benchmark policy that did not consider gender and underrepresented community diversity.

Going forward, federal and state lawmakers are turning more attention to the proxy advisory firms over their market power, conflicts of interest, foreign ownership, and lack of economic analysis underpinning their voting recommendations.⁴  To deflect this, Glass Lewis announced in May that it will encourage and assist its investor clients in creating their own proxy voting guidelines and, beginning in 2026, it will open its platform to third-party voting policies as alternatives to Glass Lewis’s policy options.

E&S Issues

E&S on the Downswing

Anticipating post-election policy changes, E&S proponents scaled back their proposal submissions by nearly a quarter to their pre-SLB 14L level: 468, down from 610 last year.

Even with the cutback, fewer than half of the E&S proposals filed reached ballots this season due to a high proportion of omissions: 21% compared to 8% in 2024.  While SLB 14M was a contributing factor, there had already been an increasing trend of ordinary business exclusions in recent years, which was the basis for 71% of the E&S omissions this year, compared to 68% in 2024.

The rate of confirmed withdrawals (24%) was generally consistent with last year, though in about half of the cases they occurred after the targeted companies sought no-action relief.  And unlike in past years, proponents have been more reticent about broadcasting the details of settlements reached with companies.

Investors’ support for E&S issues fell for a fourth consecutive year, reflecting shifts in their 2025 voting and stewardship policies deemphasizing ESG and DEI expectations.  Excluding conservative resolutions, which investors rarely endorse, average support fell to 14.8% from 19.7% in 2024 and a high of 39.5% in 2021.  Only 14 E&S proposals (6% of those voted) generated over 30% support, compared to 56 last year (15% of those voted).  Proposals on political spending disclosure—largely sponsored by Chevedden—were the silver lining, delivering five majority votes and another six achieving 30-50% support.

A more striking development was the loss of proxy advisor support for many of this year’s E&S efforts.   Excluding proposals from conservatives, Glass Lewis’s backing dipped to 32% from 41% in 2024, while ISS’s support plunged to 12% from 55% in 2024.  Notably, ISS did not support any environmental resolutions this year and it largely stayed sidelined on the DEI proposals.

Conservatives Keep up the Pressure

Unlike their liberal counterparts, conservative proponents increased their share of filings, which stood at 129 by mid-year, up from 120 in 2024, and accounted for 24% of all E&S submissions, compared to 18% last year.  In addition to seasoned activists, such as the National Legal and Policy Center (NLPC) and National Center for Public Policy Research (NCPPR), their ranks expanded to include the Heritage Foundation, GuideStone Capital Management, the Catholic Diocese of Fort Worth, Investing with Purpose Capital, and the Oklahoma Tobacco Settlement Fund.

Over 80% of conservative proposals focused on social issues with one-third directed at corporate DEI programs and policies.  Despite the high proposal volume, their E&S initiatives continued to attract only marginal support—2.2% on average—though they recorded several standout votes on human rights due to rare support from the proxy advisors.

Ten companies faced competing pro- and anti-ESG resolutions, primarily on DEI, but also on carbon reduction goals and plastics recycling.  Walmart navigated this by writing one rebuttal for both proposals in order to avoid taking sides on sensitive and polarizing issues.

DEI and Discrimination

DEI has been one of the most challenging issues confronting companies this spring in view of the 2023 U.S. Supreme Court decision in Students for Fair Admissions v. Harvard, Robby Starbuck’s 2024 social media campaign and President Trump’s EOs.

The result has been extensive rollbacks of corporate DEI policies and programs, particularly by federal contractors and companies in highly regulated industries.  According to a Gravity Research study, the most significant changes have been around hiring and representation goals, along with a recasting of “DEI” into more innocuous terms, such as “inclusion and belonging.”  Companies have also scrubbed mentions of DEI from corporate reports, regulatory filings and websites.

Although this year’s DEI proposal submissions predated the Trump administration’s directives, the impact of the EOs was seen in a shift by investors and proxy advisors towards more neutral positions.  There was also a surge in resolutions from conservative proponents, leading to pro- and anti-DEI face-offs at six companies’ annual meetings.

Pro-DEI

For the most part, pro-DEI proponents resumed their longstanding proposals calling for racial equity/civil rights audits, disclosure of EEO-1 data, and reports on the effectiveness of companies’ DEI efforts.

The latter type of proposal—primarily sponsored by As You Sow–has been the most popular over the past three years with many getting withdrawn, typically if the company agrees to disclosure outcome statistics, such as workforce hiring, promotion and retention data by gender, race and ethnicity.  However, the six voted this season saw a substantial decline in investor support, averaging 12.8% compared to 23.2% in 2024, with the lowest votes occurring on repeat proposals at International Paper and Lennar that were specific to LGBTQIA+ equity and inclusion efforts.   ISS declined to back any of the resolutions, despite supporting 85% of them last year, while Glass Lewis endorsed about half of them.

In contrast, support for racial equity/civil rights audits held up from last year, averaging 13.9%, with the highest vote appearing early in the season at Deere (29.5%)–the only one backed by ISS. This year’s collection also included a new variation by Chevedden, which specified that the audit adhere to the Civil Rights Audit Standards developed by PolicyLink in conjunction with a group of corporate executives, investors, union and worker representatives and civil rights experts.⁵

Only a handful of resolutions were directed at companies that walked back some of their DEI commitments in 2024, specifically, to report on the research and analysis the board undertook before taking such action.  Two were omitted as ordinary business by Harley-Davidson and Tractor Supply and one was withdrawn at Ford Motor.

Anti-DEI

Leveraging the momentum from Starbuck’s campaign, conservatives ramped up their requests for companies to address the legal and reputational risks of maintaining their DEI or affirmative action programs including potential discrimination against “non-diverse” employees and vendors. For the first time, they also took a more direct approach by asking nearly a dozen companies to consider abolishing their DEI efforts or to cease participating in the Human Rights Campaign’s Corporate Equality Index (CEI), which rates companies on LBGTQ+ workplace equality.

Another new angle from Bowyer Research took issue with four companies’ lack of faith-based employee resource groups (ERGs), despite recognizing ERGs formed around race, gender identity, military status and other criteria.  Department of Justice (DOJ) and Equal Employment Opportunity Commission (EEOC) guidance on the DEI-related EOs emphasized that limiting membership in ERGs or affinity groups only to employees of a certain gender, race or ethnicity may constitute unlawful segregation.⁶  According to Gravity Research’s study, companies are addressing this by opening their ERGs to all employees and aligning them with business priorities, such as professional development and networking.

Voting outcomes across the 23 proposals failed to pick up steam from last year, receiving an average of 1.6% support. The one standout was a proposal on affirmative action risk at Target, which received 7.2% and the backing of Glass Lewis.

Conservatives additionally carried over the theme of religious discrimination to 14 newly formulated resolutions on charitable giving.  Whereas their prior proposals sought disclosure of recipients above certain donation amounts, the 2025 iterations dealt with companies’ charitable partnerships—particularly with organizations that have maligned and suppressed conservative political and religious views–and the exclusion of religious charities from companies’ employer gift-match programs.  The new versions were less well-received by investors, averaging 1.2% compared to 2.9% in 2024 and a high of 7.1% in 2023.

Competing Pro- and Anti-DEI Proposals

Key Diversity and Discrimination Proposals

Climate Change

The Trump administration’s EOs and potential pullback from the climate disclosure rules reflect longstanding efforts by Republican state attorneys general (AGs) and Congressional lawmakers to protect American energy, particularly against boycotts and the defunding of fossil fuel companies.  Since 2022, major U.S. banks and asset managers have been pulling out of global climate collaborations, including Climate Action 100+, the Net Zero Banking Alliance (NZBA) and the Net Zero Asset Managers Initiative (NZAM), over anti-trust investigations.  In May, the DOJ and Federal Trade Commission (FTC) filed a statement of interest supporting an anti-trust and consumer protection lawsuit brought by 11 state AGs alleging that BlackRock, State Street and Vanguard Group used their common shareholdings and commitments in industry-wide climate initiatives to suppress U.S. coal production.⁷

As a result, companies are facing less investor and regulatory pressure to pursue net-zero decarbonization goals.  According to the Wall Street Journal, during the first five months of 2025, proxy statement mentions of “net zero” dropped 32%, references to “carbon neutral” declined 30%, and references to Scope 1, 2 or 3 emissions fell 24% from the same period in 2024.

Investor support for climate change resolutions has also fallen dramatically.  Excluding those from conservatives, climate-focused proposals saw a nearly 50% drop in average support this year to 12.3% from 23.9% in 2024.

GHG Emissions

Proposals on greenhouse gas (GHG) emissions reduction were down by over one third from last year with 41 submitted—the lowest level since 2021.  They also fell short in the vote tally, averaging only 12.6% support, compared to 27.5% in 2024.

Five proposals were deemed excludable as micromanagement.  These generally asked for a climate transition plan in alignment with the Paris Agreement goals.  About a half dozen others were withdrawn due to continuing dialogue or commitments.

Proponents steered clear of Exxon Mobil, which faced no shareholder proposals whatsoever at its annual meeting after it sued Arjuna Capital and Netherlands-based Follow This last year to keep a recurring GHG reduction resolution off the ballot.  CEO Darren Woods vowed to resort to litigation again if activist shareholders continued to abuse the proxy proposal process.  This year, Follow This backed off filing any climate resolutions at major oil and gas companies—the first time since 2016—deciding that it would be counter-productive given the “current political pro-fossil fuel agenda.”

AI Data Centers

An emerging issue this year was how tech companies will meet their climate change-related commitments in view of the growing energy demands of their expanded AI data center operations.  Notwithstanding a

lack of proxy advisor support, the resolution achieved 20.1% at Amazon.com, though only 3.3% at Meta Platforms.

Financed Emissions

This year’s resolutions on climate change finance put a heavier emphasis on insurers than banks, where 2024 proposals seeking reports on net zero-unaligned clients were deemed excludable as micromangement.

Instead, As You Sow and the New York City Retirement Systems (NYCRS) repeated their requests for major financial institutions to annually disclose their clean energy financing ratios, which compare their financing for low-carbon energy projects versus fossil fuel projects.  These survived ordinary business challenges and last year resulted in two targets–Citigroup and JPMorgan Chase–agreeing to comply.  However, this year’s effort backslid with lower average votes than in 2024–13.2% versus 25.9%–due to the loss of ISS support.  Glass Lewis opposed the initiative in both years.

At insurers, As You Sow and Green Century Capital Management continued advocating for the disclosure of GHG emissions from their underwriting, insuring and investment activities.  Relying on SLB 14M, two targets—Allstate and Hartford Insurance Group—succeeded in omitting more prescriptive versions of the proposal as micromanagement.  These called for time-based targets or the alignment of emission reduction efforts with the Paris Agreement goals.

As You Sow also introduced a new variation asking Travelers Companies to explain the impact on its homeowners’ insurance customer base of higher pricing and the loss of coverage due to climate-related factors, such as more frequent and intense weather-related natural disasters and storms.  This received 12.6% support and, taken together, the insurance-focused resolutions averaged 13.8% support, down from 25.7% in 2024 when some were backed by the proxy advisors.

Conservative Pushback

For nearly two decades, conservative proponents have posed the issue of risks arising from companies’ voluntary carbon reduction commitments, including the feasibility of net-zero goals, their legitimacy based on scientific evidence, and the potential for fraud or misconduct allegations from greenwashing.  This year’s lineup also included a more direct approach by NLPC asking several oil majors to eliminate all emissions reduction targets covering their operations and energy products.

The vote result average (2%) was unchanged from last year, with the highest score occurring for a second time at United Parcel Service—6.2% compared to 8.1% in 2024.

Environmental Protection

Recycling was the most popular topic among other types of environmental proposals with 27 submissions—the highest number ever—with most focusing on plastics use in the consumer goods, food service and hotel sectors.  Proponents undertook several new initiatives this year on misleading recyclability labeling, tire shedding and food waste.

Plastic Pollution and Recycling

As You Sow focused half of its recycling resolutions on the phase-out of flexible plastic packaging because of missed 2025 plastic reduction and recycling targets established by the Ellen MacArthur Foundation’s U.S. Plastics Pact (USPP).  Flexibles and films are difficult to recycle because of their multi-layer, multi-material design.  Votes averaged 13.3% across six companies.

Beginning in 2022, As You Sow broadened its campaign on plastic pollution, initially by urging petrochemical companies to move away from virgin plastic to recycled polymer.  Last year, it shifted to plastic microfiber shedding, concentrating on the textile industry.  This season, it asked Goodyear Tire & Rubber to set tire wear shedding reduction goals, which garnered 5.6% support.

Green Century and The Last Beach Cleanup urged six companies to report on the legitimacy of their recyclability and recycled content claims on their plastic packaging labels.  Three proposals were withdrawn and the remainder averaged 9.8% support.

In a first-time initiative, NLPC countered liberal proponents by asking Colgate-Palmolive (2.9%) and Walmart (0.5%) to reexamine their plastic packaging policies based on credible scientific and economic analysis.  Walmart bowed out of the USPP this year, as did Mondelez International which was a target of both As You Sow and The Last Beach Cleanup.

Food Waste

Following its successful GHG reduction proposals last year, The Accountability Board (TAB) took up the topic of food waste, which was last addressed by other proponents in 2021.  Unlike the earlier versions, which focused on hunger and methane emissions from food decomposing in landfills, TAB’s thrust was the environmental impacts from the production of wasted food– GHG emissions and the consumption of freshwater, fertilizer and other resources.

TAB asked nine restaurant and retail companies to measure and set targets for reducing the food waste they generate, which resulted in 11% average support for the six voted.  Two others were withdrawn and one (at McDonald’s) was omitted as micromanagement.

Key Environmental Proposals

Human Rights

For the most part, human rights proposals did not deviate from recent themes, such as the adoption of comprehensive human rights policies and due diligence processes (HRDD), operations in conflict-affected and high-risk areas (CAHRA), indigenous people’s rights, and child exploitation.

AI factored into many of the proposals on data privacy and censorship aimed at Big Tech, while a new angle on the human right to water dealt with water scarcity due to AI data centers’ cooling requirements.

For a second year, faith-based organizations framed their advocacy on drug pricing and access to medicine as human rights impact assessments (HRIA), which averaged 21.2% at three pharmaceutical companies while another two were withdrawn due to agreements.   In 2024, only one proposal was voted at Eli Lilly (10%), which succeeded in excluding this year’s petition as micromanagement.

Along with Domini Impact Investments, religious orders also repeated their call for worker-driven social responsibility (WSR) reports.  The proponents contend that WSR is a more effective model for identifying and remedying human rights abuses, such as in agricultural supply chains at this year’s targets, Kroger (15%) and Wendy’s (7.6%).

Conservatives versus Liberals

Human rights is one topic where proponents on the left and right share some common ground, particularly on child exploitation, data privacy and business dealings with countries that have a record of human rights abuses.  Historically, voting results have been vastly different, but that gap is closing due to increased proxy advisor support for conservative-sponsored proposals.

This year, Glass Lewis supported six of their human rights resolutions at tech companies: two on child safety online by Bowyer Research and four on ethical AI data acquisition and usage (data privacy) by NLPC.  ISS backed two of the same data privacy resolutions, lifting average support to 11.2%, making it the top-performing conservative initiative on E&S.   In comparison, liberal versions of data privacy proposals, mostly on AI-driven advertising policies, averaged 12.6%, while their resolutions on child safety online averaged 11.4% (compared to 7.7% for conservatives).

Key Human Rights Proposals

Labor Rights

Shareholder proposal activity by organized labor was relatively subdued compared to recent years of heightened unionization activity and large-scale worker strikes.  Union pension plans substantially pared back their 2025 filings to 58 resolutions from 98 in 2024.  Their primary areas of focus continued to be workplace health and safety and freedom of association/collective bargaining rights.

Unionization Rights

In conjunction with their organizing efforts, labor proponents asked 10 companies in various industries to uphold the rights to freedom of association and collective bargaining in their operations as reflected in the International Labor Organization’s (ILO) Declaration on Fundamental Principles and Rights at Work.  Since this campaign began three years ago, average support has been steadily declining from a high of 36.2% in 2022 to 14.1% in 2025.  Only a handful of the resolutions went to a vote with most omitted as ordinary business.

In a first-time initiative, NLPC countered the union proposals by asking Starbucks to study the human rights risks related to labor organizing efforts, including how the company is protecting the rights of employees

who do not wish to be represented by a union as well as negative impacts on shareholder value.  The resolution received 1% support.

Worker Health and Safety

For a third year, the SOC Investment Group and other proponents raised concerns about unsafe working conditions atrestaurants and retail stores, typically by calling for independent, third-party audits.  This year, only three proposals went to a vote, averaging 16.1% support, with most of the others succumbing to ordinary business challenges.  A separate initiative on airline workers’ exposure to extreme heat was settled with the targeted companies.

AI Governance

AI-related proposals largely shifted this year from worker impacts to broader human rights concerns, such as privacy intrusions.  Only a handful of resolutions continued the theme of responsible AI governance, including board oversight of AI usage and ethical guidelines to protect workers from job automation, wage discrimination and bias in employment decisions.  These averaged 9% support, down from 19.1% in 2024.

Key Labor Proposals

Political Activities

Political spending disclosure was the most successful E&S initiative this season, bolstered by near universal support from ISS and Glass Lewis.  Five proposals received majority votes and overall average support rose to 41.8% from 25.8% in 2024.  Almost all were sponsored by Chevedden.

Resolutions on lobbying disclosure continued to be the most abundant type of political activities filing. However, most were absent from this year’s corporate ballots after Air Products and Chemicals successfully argued to the SEC last fall that the request constituted micromanagement by narrowly focusing on the company’s association with specific organizations and by requiring the reporting of dozens of distinct pieces of information.  Twenty-three other targeted companies followed suit, resulting in another 16 omissions and seven withdrawals after being challenged on the same basis.  The seven voted—all of which were opposed by ISS—averaged 14.5% support, down from 29.1% in 2024.  Glass Lewis backed

all but one of the resolutions (at Visa).  The American Federation of State, County and Municipal Employees (AFSCME), which is coordinating the campaign, plans to rework the proposals for 2026.

Proxy Impact and religious orders introduced new proposals this year calling for the alignment of lobbying and political influence activities with human rights policies.  The underlying issues included Alphabet’s child safety policies and commitments (5.3%) and Lockheed Martin’s foreign military sales to customers linked to human rights violations (9.8%).

Key Political Influence Proposals

Governance Issues

Governance Proposals

Resolutions on traditional governance measures scored the highest number of majority votes this season—45 in all advocating for board declassification, special meeting and written consent rights, the repeal of supermajority voting provisions, and a sale or merger of the company.  Because of the near universal appeal of these provisions among institutional investors, 22 companies chose not to oppose the proposals while about 40 companies countered them with competing charter or bylaw amendments.⁸

Chevedden and his affiliates continued to be the leading sponsors of governance initiatives, accounting for more than half of the over 300 filed this year.  TAB, which primarily focuses on the food sector, also more than doubled its efforts in the governance space with 18 proposals, up from seven in 2024.

Individual investor Chris Mueller resurfaced for a second year with 41 proposals addressing concerns related to direct stock purchase plans, such as offering “print on demand” stock certificates, protecting securities against abusive short-sellers, and providing transparency around arbitrage exposure enabled through recurring direct stock plan purchases.  As in 2024, these were readily omitted as ordinary business or for procedural deficiencies.

As discussed below, proponents added some new spins to standard-themed governance proposals, but these failed to generate strong investor support.

Special Meetings

Resolutions calling for the adoption or enhancement of special meeting rights were the most abundant shareholder proposal filing this season with 73 submissions, the highest number since 2022 (120).

Most continued to advocate for low (10% or 15%) share ownership requirements, which averaged 47.4% support, up from 43.9% in 2024.  Nine proposals won majority approval at companies that had high (40% or more) ownership thresholds or no special meeting rights at all.

This year, Chevedden embellished his submissions with nearly two dozen that simply called for the elimination of one-year holding periods in companies’ ownership requirements.  These averaged only 10.9% support–below the 11.6% received when he last introduced them in 2023.  ISS opposed all of the resolutions, while Glass Lewis only supported those where the company’s ownership threshold was above Glass Lewis’s preferred level of 10-15%.

Dual-Class Stock

Shareholder resolutions pertaining to dual-class stock with unequal voting rights took two forms this year.  Standard proposals calling for a recapitalization plan so that all outstanding stock has one vote per share averaged 21.9%, down from 33.5% in 2024.

A new variation introduced last year at Meta Platforms, asked that voting results be disaggregated by each class of shares to better identify the concerns of the independent shareholders.  Although ISS and Glass Lewis supported this initiative, the resolutions received lower average support (12.8%) than the recapitalization proposals, including at Meta Platforms which received both types of resolutions (20.6% versus 25.8%).  In addition to the three voted, another proposal was withdrawn at Hershey due to an agreement.

Director Resignation Policy

For a second year, the United Brotherhood of Carpenters and Joiners of America attempted to interest investors in a mechanism that would force directors who fail their election to step down from the board within 90 days after the vote certification.

To avoid last year’s exclusions for state law violations, the Carpenters presented three proposal variations.  Most called for a policy requiring a director to resign after two consecutive years of failed elections.  In one version, which the Carpenters plan to refile in 2026, the board would have the flexibility to accept or reject the first year’s resignation based on its business judgment.

The 13 resolutions voted garnered 20.8% support on average—up from 17.6% for the eight voted in 2024.  ISS has consistently opposed the resolutions while Glass Lewis supports them.

Board Declassification

As occurred in 2024 at Warrior Met Coal and News Corp, shareholder activists are continuing to advance governance reforms through their own proxy solicitations, thereby bypassing the Rule 14a-8 no-action process.

In conjunction with its proxy fight at Phillips 66, Elliott Investment Management tried a creative approach to declassifying the board, where repeat management resolutions had failed to receive the requisite 80% approval to effect the change through a charter amendment.  Elliott’s workaround was a Rule 14a-4 proposal calling for a policy requiring all incumbent directors, regardless of class, to submit letters of resignation in advance of each annual meeting.

Although the measure posed issues of legality under Delaware law and the company’s governing documents, it received 32.9% support and was endorsed by Glass Lewis but rejected by ISS.  Meanwhile, the company’s proposal to declassify the board via a charter amendment failed for the sixth time.

Bitcoin Diversification Strategy

NCPPR revisited the potential merits of cryptocurrency as an inflation hedge by asking some half dozen companies to assess whether adding Bitcoin to the corporate treasury would be in the long-term interests of shareholders.  The resolution was first introduced last fall at Microsoft and this year received similarly meager support (less than 1%) at Meta Platforms.  The remaining submissions were omitted as micromanagement.

Key Governance Proposals

* Of the 2025 majority votes, 22 governance proposals were not opposed by the board.
Of the 2024 majority votes, 15 of the governance proposals were not opposed by the board.

Director Votes

Directors attracted strong levels of support with 17% fewer receiving high opposition votes (over 30%) than in the first half of 2024.  This was due in part to investors moving away from numeric requirements on board diversity and overboarding and backing off director accountability votes on E&S issues.

Sixty-two directors at 43 companies received a majority of opposition votes—comparable to the first half of 2024—which in many cases was due to compensation concerns, director independence, poor meeting attendance, and board responsiveness—particularly in regard to “zombie” directors who remained on the board despite a majority of votes being cast against their reelection last year.  Only 10 of the 43 companies had majority voting and/or a director resignation policy, and four of the boards did not accept the resignations while two others are in deliberation.

An emerging trend was the inclination of hedge fund activists to wage “vote no” campaigns rather than running competing board slates.  While this strategy is less likely to unseat incumbents, significant shareholder dissatisfaction can send a strong message to boards and give the dissidents negotiating leverage, as occurred in several cases from this year’s proxy season:

• H Partners Management conducted a direct solicitation urging Harley-Davidson shareholders to withhold votes from three board members–the Chairman/CEO, presiding director and the longest-tenured director. Although all were reelected by slim margins (51%-59%), the dissident claimed to have won concessions on leadership changes—namely, that the three directors privately committed to key shareholders that they would step down before the 2026 annual meeting.
• Ancora Holdings Group’s withhold campaign at Forward Air succeeded in forcing out three legacy directors. The board chair failed to win majority support and resigned per the company’s director resignation policy.  The other two targeted directors, who received narrow investor support (52% and 62%), voluntarily resigned.
• Impactive Capital’s “vote no” campaign at WEX generated sufficient opposition to the Chairman/CEO and two other directors (31%-37%) that the dissident announced its intent to nominate at least four director candidates at the company’s 2026 annual meeting.

Reincorporations

Reincorporation activity picked up this year with nearly two dozen companies proposing to depart Delaware for other jurisdictions due in large part to the heightened litigious environment and recent court decisions that have called into question the predictability of Delaware law.   Nevada was the preferred destination for 16 of the companies, followed by Florida (two) and Texas (two with one–MercadoLibre—backing out).

To stave off the outflow, Delaware amended the Delaware General Corporation Law (DGCL) this spring by establishing safe harbors for controlling shareholder and interested party transactions, clarifying the definition of a controller, and limiting the scope of books-and-records demands.  Even so, some companies remain concerned that the amendments are untested and subject to judicial interpretation.

Nevada and Texas have similarly been revising their corporate statutes to create a more business-friendly legal environment, including enhancing liability protections for directors, officers and controlling shareholders.⁹  Texas went so far as to allow certain public companies to include in their governing documents minimum ownership requirements for shareholders to bring derivative suits and to submit shareholder proposals (other than director nominations).  Additional legislation signed into law in late June would mandate a disclosure regime for proxy advisory firms that make recommendations on companies incorporated or headquartered in Texas that are based wholly or in part on non-financial factors, such as ESG, DEI or sustainability scores, or that are in opposition to the board’s recommendations.¹⁰  ISS and Glass Lewis are pursuing legal action to declare the measure unlawful and have it enjoined.¹¹  The law takes effect Sep. 1, 2025.

At least two Texas companies—Tesla and Southwest Airlines—have amended their bylaws to avail themselves of the revisions to the Texas Business Organizations Code (TBOC) by establishing a 3% ownership limit for shareholders to initiate or maintain a derivative proceeding and to provide for a jury trial waiver for internal equity claims. Tesla has scheduled its annual meeting for Nov. 6, 2025, and therefore could be a test case for the proxy advisor disclosure requirement.

Compensation Issues

Compensation Proposals

As in 2024, Chevedden sponsored over 60% of the compensation-related proposals, primarily on severance pay, clawback policies and executive stock retention requirements.  The latter generated the most traction with the highest level of average support (33.8%).  Average votes on the expansion of recoupment policies plunged to 6.7% from 17.7% last year because most of the targeted companies already had robust policies that in many cases went beyond what the proposal sought.

Overall, ISS’s support for shareholder compensation proposals was consistent with last year.  Glass Lewis backed a much larger proportion than in 2024:  44% versus 20%, excluding those from conservatives.  This was due to the absence of any gender/racial pay equity proposals on 2025 ballots, which Glass Lewis generally opposed last year.  The two pay gap proposals filed this season (at Amazon.com and Comcast) were withdrawn after being challenged as micromanagement.

Severance Pay

Since their peak in 2023, Chevedden’s severance pay proposals have decreased in volume due to the number of companies adopting policies requiring shareholder approval of future executive pay packages that provide cash severance payments exceeding 2.99x base salary and bonus.

This year, average votes rose to 23.6% from 15.5% in 2024 due to better targeting and a higher number supported by the proxy advisors.  ISS’s and Glass Lewis’s recommendations were largely aligned since they are both looking for a policy that guarantees shareholder approval of golden parachute-level payouts.

Delink Pay from ESG

For a second year, NLPC asked companies to consider eliminating ESG metrics from executive pay incentives.  In 2024, the emphasis was on decarbonization targets but largely shifted this year to discriminatory DEI goals.  The five DEI-focused proposals averaged 1.3% support and one was withdrawn at PepsiCo, which agreed to drop DEI incentives for its executives.  Three others were omitted as substantially implemented or materially false and misleading because the companies’ executive compensation plans no longer included DEI-related inducements.

According to Farient Advisors, the share of S&P 500 firms using DEI metrics in their executive compensation plans fell sharply this year to 22% from 52% in 2024.¹²  It noted, however, that some companies simply modified their language to avoid it looking like a DEI measure.  NLPC said that next year it plans to press companies on whether they actually dropped their DEI efforts.  It is also filing lawsuits to induce firms to decouple executive pay from DEI goals.

Key Compensation Proposals

Say on Pay

Buoyed by last year’s strong market performance, management SOP proposals posted solid results across all U.S. public companies for the first half of 2025.  While average support (90.5%) dipped slightly below last season’s average (91%), the failure rate (1.3%) and the proportion of companies receiving less than 70% support (6.1%) was identical.  Similarly, the percentage of companies receiving a negative ISS recommendation on SOP (12.3%) and the average support they received (72.6%) were nearly on par with the 2024 proxy season.

Of the 36 failures through June of this year, 25 were among Russell 3000 firms, including five in the S&P 500 index—Molina Healthcare, Simon Property Group, Otis Worldwide, Thermo Fisher Scientific and Warner Bros. Discovery.  Only nine cases (25%) of multi-year failures occurred, compared to over one-third of the pay rejections in the first half of 2024.

The reasons underpinning the failed votes also shifted.  According to Semler Brossy’s review, the most common investor concerns this year were special awards/mega-grants, shareholder outreach and disclosure, and non-performance-based equity.¹³  Last year’s failures were primarily attributed to pay-for-performance misalignment, the rigor of performance goals, and problematic pay practices.

Looking ahead, next year’s SOP votes will be impacted by Glass Lewis’s planned overhaul of its quantitative pay-for-performance (PFP) assessments.  This will include replacing the historical A-F letter grade system with a new 0-100 numerical scorecard system, with an associated concern level, and lengthening the evaluation period for key PFP tests from three to five years.

Longer term, the SEC is revisiting executive compensation disclosure requirements to assess whether the current rules are cost-effective for company compliance and provide material information for investors in plain English.  At a June roundtable discussion, participants cited several areas in need of reform, including  overly complex and lengthy Compensation Discussion and Analysis (CD&A) disclosures; the high compliance costs of pay-versus-performance (PvP), CEO pay ratio and clawback requirements; and the treatment of executive security expenses as perquisites.  The Commission is continuing to solicit public comments to inform its next steps.

SOP Voting Trends

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.

Through the first quarter of 2025, investors were coming to grips with the adverse consequences of rising tariffs. The S&P 500 Index fell 4.3% during the first quarter and the S&P 500 Equal Weighted index fell just 1.1%, reflecting broader participation in the market this quarter. Investors and the general public alike found themselves wrestling with the uncertainty that arose from the current administration’s intent on implementing higher tariffs on imported goods from most trading partners, which weighed heavily upon investors. To that end, we at Alliance Advisors decided to research one particular segment of the investment community, deep value investors, to see where they were looking for best opportunities. In combing through the portfolios of close to 95 investors who classify their investment strategy as Deep Value, we searched for sectors that had the greatest difference between the number of firms that bought than sold. This analysis found these investors were net most bullish on Health Services and Communications sector stocks, while the largest net number of investors were most aggressively reducing exposure to Producer Manufacturing and Technology Services.

Health Services

To understand what drove the attraction to the Health Services sector, we analyzed the largest buyers of this sector, which proved to be Dodge & Cox, Davis Selected Advisers LP and Barrow, Hanley, Mewhinney & Strauss LLC. Across all three investors was one common stock purchase – CVS. The fund having the greatest impact on Dodge & Cox’s Health Service investment trend was the Dodge & Cox Stock Fund, led by David Hoeft. In the fund’s first quarter investment commentary, the investment team commented, “In 2024, the Health Care sector faced significant challenges due to margin pressures and concerns about the potential for adverse regulatory changes. After being 2024’s largest detractor, Health Care was the top-contributing sector to the Fund’s relative performance during the first quarter of 2025. Our activity in the shares of CVS Health is an example of our contrarian, long-term approach. CVS has rebounded strongly after weak 2024 performance, up over 50% in the first quarter. 2024 was a difficult year for CVS due to weaker sales at its pharmacies and higher medical costs in its Medicare Advantage health insurance segment. The company’s results rebounded in the fourth quarter under new CEO David Joyner, who joined in October. The strong results fueled investor hopes for a turnaround. Consistent with our contrarian approach, we added to CVS during 2024 and early 2025 to take advantage of the company’s depressed valuation and our positive long-term outlook for the company.”

Another stock that was fancied by these same investors was Cigna. Davis Selected Advisers’ Davis NY Venture Fund managers Chris Davis and Danton Goei recently commented, “…our investments in this important sector [healthcare] have focused on those companies that play a part in moderating or reducing the natural rate of increase in healthcare spending. Companies such as Cigna and Humana, for example, offer programs like Medicare Advantage which deliver patients a higher quality of care at a lower cost.”

Communications Sector

The Communications sector saw the second largest net number of buyers over sellers but recorded the smallest capital inflows of all the sectors with positive net inflows. Unlike with the Heath Services sector, there were no commonalities with particular stocks that were driving the trend. Interestingly though, much of the funds driving the buying trends within this sector were non-US focused (i.e. Emerging Market, Global, International, etc.). This non-US focus directly ties back to the theme at the beginning of this paper – tariffs. The fund management team of the Brandes Emerging Markets Value Fund commented in their 1Q quarterly commentary, “We have also observed substantial value potential in select businesses in Mexico as the market remains concerned about tariffs… The Fund’s other Mexican holdings, such as telecom services provider America Movil, have significant exposure to non-Mexican peso currencies.”

Sources of Capital

“Our examination of what sectors were used as sources of capital for aforementioned purchases, we note:

• Deep Value investors rotated away notably from Technology Services and Producer Manufacturing sectors.
• Technology Services saw the largest outflows, totaling $6.2 billion in Q1 2025.
• Major driver was selling of Alphabet stock.
• Alphabet was the top performance detractor for Harris Associates’ Oakmark Global Fund.
• Fund manager David Herro noted Q4 2024 earnings met consensus, except for a slight miss in Google Cloud revenue growth due to short-term capacity issues.
• Long-term growth outlook for Google Cloud is viewed as strong.
• Alphabet seen as a collection of strong businesses benefiting from AI capabilities.
• Shares trading at ~15x next year’s estimated earnings, considered significantly undervalued.
• Despite this, the fund reduced its Alphabet exposure by approximately 13%.”

Trading Activity

High activity (>75%) occurred in 10 sectors, such as Producer Manufacturing (97.8%), Finance (94.6%), and Technology Services (92.5%). Lower activity in winners like Communications (51.6%) implies steadier, conviction-driven buying. High-volatility sectors like Retail Trade (88.2%), where elevated trading is already jumpy amongst deep value investors, tariffs hitting consumer goods could trigger even more instability within the sector.

Sector Diversification & Implied Value

Most sectors showed a negative diversification with deep value investors (indicating a higher concentration among a few holders, and investors maintaining more liquidity). With only three positives: Finance (5.6%), Technology Services (1.7%), and Process Industries (0.4%). Lowest were Consumer Non-Durables (-8.7%), Consumer Durables (-7.6%), and Retail Trade (-4.5%). Lower diversification in outflow-heavy sectors like Technology Services could amplify deep value investors sentiment to the downside, while Finance’s high diversification offers a buffer during high levels of volatility and uncertainty.

Conclusion

With political uncertainty weighing heavily on investors’ minds, institutional capital clearly leaned into sectors offering defensive growth and contrarian opportunity. Health Services emerged as a standout beneficiary, not merely due to favorable stock selection but because it aligned with deep value investors’ broader goal: to uncover temporarily depressed, misunderstood, or structurally undervalued assets that offer return potential.

The strategic overweight in health services stocks, specifically in companies like CVS and Cigna, underscores this conviction. Investors collective interest in CVS encapsulates deep value behavior: buying into fear, anticipating recovery. Cigna, too, illustrates a value-aligned thesis centered not just on recovery, but operational relevance. These stocks weren’t merely ‘cheap’; they were strategically resilient, less sensitive to geopolitical shocks like tariffs, and positioned for normalized earnings rebounds in 2025.

In contrast, sector outflows in Technology Services and Producer Manufacturing reveal the flip side of this rotation. Technology, once favored for growth, faced valuation compression and earnings-related disappointment (e.g., Alphabet), making it less attractive to value-driven allocators. Despite consensus expectations being met, underperformance in key segments like Google Cloud triggered reassessments and partial exits. This suggests that for deep value investors, valuation alone is not sufficient, companies must also exhibit short- to mid-term operational catalysts or margin of safety in times of volatility.

The larger takeaway: deep value investors in Q1 2025 demonstrated an active rotation strategy, exiting richly valued or high-volatile sectors like Technology and Manufacturing, while embracing sectors perceived as both oversold and politically insulated. High activity in Finance and Retail suggests anticipation of volatility, but the conviction buying in Health Services, along with low diversification plays, marks a targeted move toward sectors with tangible recovery paths.

This behavior affirms that deep value is not passive or reactive, it is forward-looking and willing to withstand short-term volatility in pursuit of long-term gains. As regulatory visibility improves and regulatory uncertainty stabilizes, many of these 2024-depressed health stocks may continue to serve as core holdings, reflecting the discipline and patience that define deep value capital allocation.

With investors turning to unique ways to uncover stocks that will flourish in these uncertain times, Alliance can assist Investor Relations professional in crafting the proper message while also identifying which investor portfolios your stock is best aligned. Alliance offers dedicated institutional targeting specialists with proprietary algorithms that can maximize engagement efforts and reduce the ‘courtship’ period of cultivating new shareholders.

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.