Shareholder activism is on the rise—but more actions are failing due to their ‘lower quality’

February 6, 2023, 10:59 AM UTC
Updated February 6, 2023, 11:01 AM UTC
Activist shareholder Nelson Peltz, the founder partner and chief executive officer of Trian Fund Management.
Activist shareholder Nelson Peltz, the founder partner and chief executive officer of Trian Fund Management.
Calla Kessler—Bloomberg via Getty Images

Good morning.

Shareholder activism is on the rise, according to a new analysis released this morning by The Conference Board (and shared in advance with CEO Daily.) The volume of shareholder proposals is expected to increase in 2023, in part because new rules from the SEC narrow the grounds for excluding such proposals, and also because more players are getting into the game.

A few important trends:

—Shareholder actions on ESG topics are rising, but the percentage of those actions that succeed is declining. The number of climate-related proposals filed against Russell 3000 companies last year, for instance, jumped to 102 from 60 in 2021. But average support for those proposals dropped to 34% in 2022 from 40% in 2021. The report says that’s not a sign of an ESG backlash, but rather a result of “lower quality” ESG proposals and a belief by shareholders that companies are dealing more seriously with ESG issues to begin with.

—Average support for directors in the Russell 3000 slipped last year to 94% from 95% in 2021. And actions opposing executive compensation packages gained more support, rising to 32% in 2022 from 21% in 2021. The study’s authors expect those trends to continue in 2023, as lower stock prices create a more fertile environment for activists looking to speed up strategic and capital allocation changes.

—“Anti-ESG” shareholder proposals are expected to rise this year, driven by both poor corporate performance and ideology.

I spoke Friday to one CEO who is fighting back against shareholder activism: Joe Kiani, founder of the medical technology company Masimo. The company is in a legal spat with Politan Capital after Masimo changed its bylaws to require Politan to disclose the names of its LPs and their holdings in Masimo competitors before offering a directors’ slate. Says Kiani: “If activists are going to put up a slate of directors for election, they should live by the same standards of disclosure we do.” Trial starts next week, and a ruling is expected before the company’s proxy election in March. Keep an eye on this one.

The Conference Board produced the proxy season analysis in conjunction with ESGAUGE, Russell Reynolds and the Rutgers Center for Corporate Law. You can access the full report here.

Alan Murray


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This edition of CEO Daily was edited by David Meyer. 

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