In 2023, 982 companies were subject to activist campaigns globally, a 4.6% rise compared to a year prior and the highest level since 2019. This is according to the new Diligent Market Intelligence: Shareholder Activism Annual Review 2024 report from Diligent. The findings were released live today at Diligent’s first annual Proxy Season Preview, a leading proxy season conference featuring panels and keynote speeches from the world’s most prominent stewardship specialists on topics including shareholder activism, environmental, social and governance (ESG), executive compensation and more.
According to the report, more companies are identifying activism as a risk in their corporate disclosures. In 2023, 23.4% of Russell 3000 companies disclosed shareholder activism as a risk in their 10-K reporting, up from 21.4% a year prior. Financial resilience and the introduction of the universal proxy card are driving both traditional and nontraditional activists to launch campaigns aimed at remuneration and ESG oversight.
“Market conditions are playing a notable role in shaping activist demands and the companies which activists choose to target,” said Josh Black, editor-in-chief of Diligent Market Intelligence, at Diligent. “Now more than ever, boards need to demonstrate that they are financially resilient and have strong governance practices in place to stay one step ahead.”
Three themes emerge from the report’s key findings that both boards and investors should have on their radar. These include:
Activism goes global as shareholders look to maximize returns:
- In 2023, 550 U.S. companies were publicly subjected to activist demands, a 7.8% rise compared to a year prior, with many campaigns taking aim at costly M&A transactions. The U.S. saw a 20.8% increase in the number of companies subjected to oppose M&A demands, from 24 to 29.
- 220 Asia-based companies were subject to demands in 2023, marking the third consecutive year of increasing campaigns in the region while, in Canada, 69 companies were subjected to demands a 25.5% increase compared to 2022.
- Meanwhile, shareholder activism stagnated in Europe, with 123 European companies publicly subjected to campaigns in 2023, down from a high of 177 in 2021. However, the number of board seats activists secured held steady at 36 in 2023 compared to 38 in 2022, indicating that activists are continuing to push for board representation in Europe.
Market volatility prompts increase in remuneration demands:
- Investors enhanced their focus on remuneration in 2023, keen to ensure companies have robust policies and practices in place to weather market risks. In the U.S., 81 companies faced remuneration-related demands, a 37.3% increase compared to the 59 seen in 2022 and the highest increase of any demand type.
- Shareholder proposals concerning pay are also winning increased backing. Three proposals seeking clawback policy amendments won 36.5% average support at U.S.-based companies, up from five winning 27.5% support a year prior.
Universal proxy provides an avenue for non-traditional activists to launch ESG campaigns:
- The number of ESG demands publicly made by primary- and partial-focus activists increased in 2023 to 132 demands globally, up from 114 demands a year prior, and almost double the 79 seen in 2021.
- In the U.S., the newfound freedom universal proxy offers when casting votes is bringing forth non-traditional activists, seeking board composition changes to remedy ESG shortcomings.
To download the full report, produced in association with Olshan Frome Wolosky, click here.