Barri Rafferty, CEO of Morrow Sodali, a global advisory firm, sheds light on the rising cases of shareholder activism post-pandemic. Activist campaigns are becoming more sophisticated, influencing companies’ strategic plans and governance practices. Trends in activism are impacting areas like M&A campaigns, ESG-driven proxy contests, and changing retail shareholder support.
M&A activism is on the rise, with shareholders either supporting or opposing transactions. In the U.S. alone, there was a 20.8% increase in opposition campaigns against M&A transactions last year, according to Diligent Market Intelligence. Companies should focus on robust shareholder engagement to understand their evolving shareholder base and effectively communicate the strategic rationale behind M&A deals.
ESG activism is undergoing a shift, with the recent proxy contest at Starbucks by the Strategic Organizing Center marking a fundamental change. Although the unions dropped their campaign, it brought Starbucks to the bargaining table, demonstrating the pressure shareholder activism can exert on a company’s labor practices. This approach to ESG activism may require more attention and resources from companies in the future.
Retail shareholder opposition is transforming, with retail investors having more influence over voting outcomes. The new retail investor seems less inclined to support ballot items and may even vote for a new board if given the opportunity. Companies can deepen their understanding of retail investors’ concerns by engaging with them proactively before conflicts arise, potentially winning close votes in the process.
In the current environment, companies will continue to face pressure from activists. To navigate this landscape effectively, companies should engage in ongoing dialogue with shareholders, be open to strategic changes, and consistently articulate their value proposition. By focusing on stakeholder engagement year-round and understanding their shareholder base, companies can adapt and thrive in the face of shareholder activism.
Forbes Business Council is a premier organization for business owners and leaders seeking growth and networking opportunities. Barri Rafferty’s insights provide valuable guidance for companies navigating the complexities of shareholder activism and stakeholder engagement in today’s dynamic business environment.
