Many believe 2018 was a record year for shareholder activism. Since 2017, the number of activist campaigns increased by 5.5%, with about 268 campaigns announced in total (Melissa Sawyer, Lauren S. Boehmke, and Nathanial R. Ludewig, Harvard Law Review). In 2018, a record amount of capital was deployed in new activist campaigns and an unprecedented number of investors engaged in activism, with the number of first-time activists roughly doubling the 2017 numbers. However, these statistics do not tell the whole story (Melissa Sawyer, Lauren S. Boehmke, and Nathanial R. Ludewig, Sullivan & Cromwell LLP). 

Shareholder activism enables shareholders to influence a corporation’s behavior by exercising their rights as partial owners (Mary Ann Cloyd, Harvard Law Review). Shareholder activists may seek changes in corporate behavior to satisfy a range of goals, including changes in  environmental policies, corporate governance or the company’s business model, or profit distribution (Id.) Activist shareholders use a variety of tactics to achieve their goal, ranging from a full-blown proxy contest to take control of a company board to shareholder proposals asking for policy changes to discussing their concerns with companies’ directors and executives in order to urge them to take action. (Paula Loop, Catherine Bromilow, and Leah Malone, Harvard Law Review).

While the past five-year average for activist campaigns developing into proxy contests is approximately 21%, in 2018, only 19% of activist campaigns developed into a proxy contest. (Melissa Sawyer, Lauren S. Boehmke, and Nathanial R. Ludewig, Sullivan & Cromwell LLP). The slight decrease highlights that both companies and activists strategies are changing.  Board representation continued to be a favored tactic in 2018 as activists won an estimated 161 board seats, setting a record for most won board seats in a year according to Lazard. Yet, proxy contests only accounted for 22% percent of the board seats won, demonstrating the preference of companies to negotiate with activist shareholders before the proxy contest is initiated in hopes of avoiding the costly and time-consuming process and the negative publicity that comes along with a proxy contest (Gail Weinstein, Warren S. de Wied, Philip Richter, Harvard Law Review). It is important to note that Starboard, Elliott, Icahn, Legion, and ValueAct (the top five activists measured by board seats won in 2018) account for about 50% of the board seats won during 2018, emphasizing the fact that although the number of activists and first-time activists have increased, only a small number of activists were successful in achieving their objectives (Id.). However, board seats were not the only objective for shareholder activists in 2018.

M&A-related objectives were also a focus for activists in 2018, and the trend has continued into the first quarter of 2019 as well (Jim Rossman, Lazard). Approximately 33% of publicly announced activism campaigns were M&A driven in 2018; whereas roughly 46% of initiated activism campaigns had an M&A-related focus in the first quarter of 2019 (Jim Rossman, Harvard Law Review). The focus on M&A-related objectives for activists’ campaigns may be a sign that activists are becoming more aggressive as they seek to improve their financial marks. Activists may now be on the attack by pressing for the sale of a company to identified buyers, and may be more inclined to bid for companies themselves, particularly with the continuing political uncertainty and market volatility (Gail Weinstein, Warren S. de Wied, Philip Richter, Harvard Law Review).

As the 2020 political campaign looms, political uncertainty will continue to create volatile market conditions. If the market experiences a downturn for an extended period of time, there would likely be a decrease in activity from shareholder activists in the equity market. (Id.). However, the focus of activism is changing as environmental-social-governance (ESG) and workplace issues have come to the forefront of the public eye and investors, boards, and legislatures are taking note. (Id.). ESG expands the criteria in which activists are able to claim underperformance of a company by increasing ambiguity as ESG requires a non-quantitative analysis, resulting in more subjective views when evaluating a company’s performance. (Alexander Kraik, Vermont Law Review) Investors are now seeing the importance in non-financial information for informed decision making and the general public has become more concerned with the composition of boards while putting more pressure on companies to increase women representation on boards. (Id.).