The recent proxy season was a challenging one for shareholder activists, despite institutional investors and proxy voting advisers backing more dissident nominees.

Activists won at least one board seat at 29% of campaigns that went to a vote or settled this proxy season, according to Insightia’s Activism module, compared to at 54% and 34% of campaigns throughout the 2020 and 2021 proxy seasons, respectively. Most of the wins were at smaller companies, while activists had less luck against bigger companies with resources to mount a vigorous defensive.

Besides stronger defenses, other reasons for the continued slowdown in activism include stock market volatility and growing economic uncertainty that has made valuing and targeting companies more difficult, according to industry players who spoke with Insightia.

Lending Support

The lower success rate is surprising, given the notable increase in institutional support for dissident nominees, especially by BlackRock and proxy advisory firms Institutional Shareholder Services (ISS) and Glass Lewis.

BlackRock supported dissidents in nearly 40% of the situations where they voted at contested situations this season, up from around 33% and 14% in the 2020 and 2021 proxy seasons, respectively. While Vanguard’s voting record was roughly the same as the prior year, State Street Global Advisors (SSGA), Fidelity International, and JPMorgan were all more favorable towards activist slates this season.

“2020 and 2021 remained mired in the thick of the COVID-19 pandemic, which forced activists to act with finesse because proxy advisory firms and investors were more likely to give incumbents a hall pass,” Jim Chadwick of Ancora Advisers told Insightia in an interview. “We’re seeing now post-pandemic that activism is very much back to ‘normal.’”

Activist shareholders were also back in favor with the leading proxy advisory firms. ISS supported activist slates in 42% of the contested situations it voted on over the 12 months ending June 30, versus 30.8% in the same period a year earlier, though down from 60% in the 2019-2020 period. Glass Lewis supported activists in 32% of cases this season, up slightly from 31% in the 2021 season and 27% one season prior.

That support was undeniably important. In no cases this season did an activist win board seats without at least partial support from both proxy advisers.

The Winners

Cruiser Capital won three board seats at agrochemical company American Vanguard after winning support from both ISS and Glass Lewis. Voss Capital nominee Charles Diao was elected to the board of manufacturing conglomerate Griffon after the former investment banker won the support of both the leading proxy advisors. U.S. activist hedge fund Donerail Group gained three board seats at Turtle Beach, with a fourth to be named after four months if the gaming headset maker does not sell itself by then, after gaining support from both ISS and Glass Lewis.

While Griffon is a small cap with a market capitalization of around $1.6 billion, both American Vanguard and Turtle Beach are micro-caps with less than $500 million in capitalization.

And the Losers

Winning at bigger companies was harder, especially if the activist gained only partial support from proxy advisers. Starboard Value won the backing of ISS in its campaign against $5-billion market cap Huntsman. Yet Glass Lewis didn’t agree, which was enough to help management defeat all four activist nominees.

Ancora similarly lost its bid for three seats at Spartan Nash with partial support from ISS and none from Glass Lewis, while Kohl’s was able to fend off a bid for 10 seats by near-5% shareholder Macellum Advisors, despite the activist winning partial support from ISS. Unsurprisingly, some of the bigger fights that might have ended in activist victories settled, including Sachem Head at US Foods Holding and Carl Icahn at Southwest Gas. Both companies replaced their CEOs in the process, showing that votes aren’t everything.