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Shareholder activism is arguably stronger than ever. Campaigns focused on environmental, social and governance (ESG) issues have risen in number, though the anti-ESG movement may dampen some of the momentum on this front. Governance and M&A-related campaigns, among the most common areas of attention, have seen a resurgence that will persist if 2024 brings the anticipated increase in M&A activity. Activists will likely push for more business unit sales through portfolio rationalisation, as well as whole company sales.

UNITED STATES

Morrow Sodali

“In the US, the last 18 months saw an overwhelming focus on how the universal proxy card (UPC) would impact shareholder activism campaigns after a significant amount of speculation and anticipation among advisers in the space. Hypotheses ranged from whether the implementation of UPC would open the floodgates for first-time activists, to whether the UPC could be weaponised in certain situations. Virtually all campaigns and engagements were approached with added layers of caution – and rightfully so, as we have not had such a significant change to contested proxy voting mechanics in decades.”

CANADA

Davies Ward Phillips & Vineberg LLP

“Shareholder activism in Canada experienced a resurgence in 2022 and 2023 after a slump in the months following the onset of the coronavirus (COVID-19) pandemic in North America. Large-cap Canadian listed companies – those with market capitalisations exceeding C$1bn – have been disproportionately targeted, often by US hedge fund activists seeking opportunities north of the border. In 2023, a relatively new phenomenon – ‘activist swarms’ – emerged. Described as multiple shareholders of a single issuer making contemporaneous, but uncoordinated, public demands from the company’s leadership, these activist swarms made headlines in 2023.”

UNITED KINGDOM

Davis Polk & Wardwell London LLP

“The UK remains the focus of activist campaigns in Europe, no doubt because of the large number of publicly traded companies in the UK relative to other European countries, and the relatively broad shareholder consents that such companies must seek on an annual basis and in connection with corporate actions. Key areas of focus for activists in the UK include board composition, executive remuneration, corporate strategy, which is often accompanied by a request for board representation, and M&A strategy, often with a demand to break up a group and return value to shareholders.”

GERMANY

Cleary Gottlieb Steen & Hamilton LLP

“Within the last few months there has been quite a bit of activity. However, due to volatile market conditions, activist campaigns mainly stuck to the ‘well-trodden paths’. These included engaging management in discussions about the strategic direction of the company, pointing to hidden value that could be realised by splitting businesses, and the usual arbitrage in takeover scenarios. The intensity and thoroughness activists apply when scanning the market for potential opportunities has increased. Complex business models and relative underperformance remain key triggers for activists’ interest in a target.”

SOUTH KOREA

Georgeson & Company Inc

“Between 2020 and 2023, there was a steady increase in the number of shareholder proposal submissions on outside directors, audit committees and internal auditors. These increases reflect the growing focus from both domestic Korean investors and large offshore investors on the importance of supervising directors and management. The main reasons for this are the significant expansion in the number and engagement levels of retail investors and better coordination of their campaigns. Another important factor is greater attention to corporate governance accountability from institutional investors, regulators, proxy advisers and investors.”

JAPAN

Georgeson & Company Inc

“Over the past two to three years, Japan has quickly risen to become one of the most significant locations for shareholder activism anywhere in the world. There is a combination of trends at play. These include regulatory measures from the Tokyo Stock Exchange and government to address historical gaps in Japan’s corporate governance framework, such as defensive capital management practices, extensive cross-shareholdings between major listed companies, and lack of independence and diversity on boards. There is also increasing influence being exerted by foreign investors such as global asset managers and major pension funds.”

AUSTRALIA

Norton Rose Fulbright Australia

“Shareholder activism continued to be a prominent feature of corporate life for Australian Securities Exchange-listed companies in 2023. One notable trend is that the expected profile of a shareholder activist has changed markedly. Once the province of specialist funds, shareholder activism has been taken up by Australian superannuation funds, as well as regular, mainstream funds. In the highest profile example, Australia’s largest pension fund AustralianSuper influenced the outcome of a bid led by Brookfield Asset Management and EIG to acquire Origin Energy last year.”

CONTRIBUTORS

Cleary Gottlieb Steen & Hamilton LLP

Davies Ward Phillips & Vineberg LLP

Davis Polk & Wardwell London LLP

Georgeson & Company Inc

Morrow Sodali

Norton Rose Fulbright Australia