DealLawyers.com Blog

This Cooley M&A blog takes a look at 2024 activism trends. One of the oft-cited 2024 trends is the targeting — and subsequent replacement — of CEOs. As the blog explains, “activists had greater success in driving executive shakeups, logging 27 CEO resignations following the launch of a campaign (an all-time high, representing a 69% increase over the four-year average and a 170% increase since 2020).”

2024 may seem like a lifetime ago, but proxy contests are up and these trends are still relevant and top of mind for boards and activism defense counsel — as was very evident from the engaging panel “Shareholder Activism and the Polarization of ESG and DEI” at Tulane’s Corporate Law Institute earlier this month. The Tulane panleists noted that criticism of a company’s strategy and operations has always been an indirect criticism of management, but that activists focus on leadership when the board isn’t taking the hard steps to make change when it’s needed. At the same time, one panelist noted that the 2024 data may not solely reflect activist influence since some of the boards may have already been contemplating or preparing for change in management.

CEOs and other members of management looking at this data may be wondering what they can do to get ahead of activist concerns that could lead to a costly and time-consuming engagement. The blog makes a few suggestions for management teams in that regard. Below I’ve highlighted the suggestions focused on ensuring the company’s current strategy is in its shareholders’ long-term best interest and effectively communicating that to investors:

– Taking proactive measures to improve cost and operational efficiency, including streamlining workflows, outsourcing non-core functions and embracing automation where possible.
– Publicly laying out the company’s long-term vision and strategy for addressing secular changes in the company’s market, including potentially through holding an investor day (although note that detailed long-term targets can often be used against you in a later activist campaign).
– Proactively monitoring and engaging with the investor base, including laying conceptual groundwork for material strategic transactions outside existing strategy and maintaining a detailed contact log with top shareholders.
– Taking investor feedback into account and taking credit for proactive changes in investor materials and communications.
– Monitoring performance relative to peers, including on a total shareholder return basis over one-, three- and five-year periods.

– Meredith Ervine