U.S. Companies Subjected to Activist Demands Increased by 11.3% Since 2021 Amid Momentum from Universal Proxy, According to Diligent

Data from Proxy Season Review 2023, a new Diligent Market Intelligence report, shows that a surge in settlements should give activists plenty of room for optimism

New York, NY, August 2, 2023 — Activist investors gained strong momentum in the 2023 proxy season, with 403 U.S. companies subjected to activist demands in 2023, compared to 362 in the same period in 2021. This is according to the new Diligent Market Intelligence Proxy Season Review 2023 report from Diligent produced in association with Olshan Frome Wolosky and Morrow Sodali.

Launched earlier this week, Diligent Market Intelligence is a market-leading provider of governance and shareholder intelligence. The report revealed that overall, global support for environmental, social and corporate governance (ESG) proposals declined, with only 2.4% of environmental and social shareholder proposals winning majority support, compared to 10.1% in the first half of 2022. Instead, investors have narrowed their focus on ESG, prioritizing cost-of-living concerns and executive compensation amidst a tight labor market.

“Directors are being subjected to increased scrutiny as investors and proxy advisors seek assurance that boards are sufficiently equipped to handle current market challenges,” said Josh Black, Editor-in-Chief at Diligent. “Now more than ever, boards need to establish strong governance practices and uncover vulnerabilities to shareholder activism early on to stay one step ahead.”

Three themes emerge from the report’s key findings that boards should have on their radar. These include:

Activists refocus on financials:

  • The number of capital structure, return cash to shareholder, and operational demands increased by 39.3%, 25.9%, and 17.4% globally, compared to a year prior, with activists keen to maximize investor returns amid depressed markets.
  • Activists racked up 214 board seats at the end of June globally, compared with 201 at the same point in 2021.
  • Globally, the push for M&A and divestiture demands were down 17.4% and 8.7%, respectively at the end of June, compared with mid-year 2022. This is due to companies’ reluctance to do deals that could be challenged by vigorous antitrust enforcers.

Investors sharpen their focus on ESG with increased attention on compensation and human capital:

  • Support for ESG proposals has been mixed, with investors favoring specificity. Globally, nine (2.4%) environmental and social shareholder proposals won majority support, compared to 36 (10.1%) in the first half of 2022.
  • The 19 climate change shareholder proposals subject to a vote at North America-listed energy companies had an 11.1% pass rate, up from 8.3% a year prior.
  • The number of remuneration shareholder proposals subject to a vote at U.S.-listed companies in the first half of 2023 increased by 21% to 46, compared to 38 throughout 2022. Six (33.3%) proposals seeking investor approval of severance payments won upwards of 40% support this season.

Directors face increased scrutiny amidst current market challenges:

  • In the first half of 2023, shareholder support for global director elections has declined to 95.6%, compared to 96.4% and 96.1% throughout 2021 and 2022, respectively.
  • Glass Lewis and Institutional Shareholder Services (ISS) endorsed 93.4% and 97.1% of S&P 500 director re/election proposals, respectively, compared to 98.7% and 99% of FTSE 350 director re/election proposals in the same period.

To download the full report click here.

About the report

Data from Diligent Market Intelligence’s Activism, Activist Shorts, Voting, ESG, and Governance modules, as well as Diligent’s Compensation and Governance Intel (CGI) and Manzama solutions, run from January 1 to December 31, 2022. 2023 data is as of June 30, 2023. Further data is available on request, although bespoke analysis may take 48 hours. For more information, please email dmi.press@diligent.com

About Diligent Market Intelligence

Diligent Market Intelligence (DMI) is a market-leading provider of shareholder activism, investor voting, and corporate governance data. Through its web application and data feeds, clients can access the most complete solution for listed company intelligence on the market, with broader and deeper insights than ever before.

About Diligent

Diligent is a leading GRC SaaS company that gives organizations the tools and solutions they need to bring clarity to complex risk, elevate impactful insights and get ahead of a world that is constantly changing. With solutions across governance, risk, compliance, audit and ESG, Diligent empowers more than 1 million users and 700,000 board members and leaders to make better decisions, faster. No matter the challenge. Learn more at diligent.com.

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