Barri Rafferty, CEO of Americas at Morrow Sodali, a global advisory firm focusing on stakeholder engagement, highlights the increasing cases of shareholder activism in the wake of the pandemic. Activist campaigns are becoming more sophisticated and influential in shaping a company’s strategic plan and governance practices, with several key trends impacting companies’ preparedness for such engagements.
Mergers and acquisitions (M&A) campaigns are on the rise, with shareholders increasingly supporting or opposing transactions. The number of U.S. companies facing M&A-focused opposition campaigns saw a 20.8% increase in the past year, according to a report by Diligent Market Intelligence. Effective shareholder engagement is crucial for companies anticipating such campaigns, enabling them to gauge expected votes and communicate the deal’s strategic rationale to secure necessary approvals.
The discourse around environmental, social, and governance (ESG) activism is evolving, with a significant shift seen in ESG-driven proxy contests. A recent proxy contest at Starbucks by a labor union coalition under universal proxy rules demonstrated a new approach to exerting pressure on companies, even if the union’s nominees did not win. This case study may set a precedent for future ESG activism strategies that could require companies to devote more time and resources to engaging with stakeholders.
The landscape of retail shareholder opposition is changing, with retail investors wielding more influence and showing a greater inclination to oppose ballot items compared to traditional income-focused investors. Companies need to engage proactively with retail investors beyond significant shareholders to understand their concerns and win their support, especially in close voting situations. Ongoing dialogue with shareholders, openness to strategic changes, and clear articulation of value creation will be essential for companies to navigate the pressures from activists effectively.
Companies facing activism should prioritize stakeholder engagement year-round and analyze the composition of their shareholder base to adapt and succeed in the marketplace. By fostering continuous dialogue with shareholders, being receptive to strategic shifts, and demonstrating value creation consistently, companies can better position themselves to manage activist pressures and capitalize on opportunities for growth. Forbes Business Council offers insights and networking opportunities for business owners and leaders seeking to drive growth and innovation in their organizations.
