Another “Super Year” for Activism

2024 was called a “super year” for political elections, with 72 countries and half the world’s population going to the polls. Incumbent political parties across the globe lost these elections at a dizzying rate as voters punished those seen as responsible for inflation and other economic woes. It was also a booming year for shareholder activism, but incumbent directors fared much better than their political counterparts at the ballot box as activists failed to persuade investors of their case for change in proxy contests that went to a vote. With many expecting 2025 to be another “super year” for activism, here is a look at what we observed in 2024.

The post-pandemic surge in activism continued with 255 campaigns launched by primary and partial-focus activists in 2024, up from 251 the year prior and a 7% increase when compared to 2022, according to DMI data. These figures reflect a continued surge in activism in the U.S. and Asia, including Japan and South Korea. Meanwhile, activism activity in Europe softened due to the ongoing conflict in Ukraine and general economic uncertainty.

Activists and companies in the U.S. continue to evolve, adapting their strategies over time amidst a changing activism landscape. Activists had a dismal year at the ballot box in the second full year under the universal proxy card rules, with only eight U.S.-headquartered companies losing at least one seat at a contested election.

Proxy advisors and investors continue to demand that activists prove a compelling case for change. In some proxy contests, activists nominated slates, sometimes for control, that went far beyond what was justified. In others, companies addressed the merits of the activist’s campaign unilaterally. At the same time, the uncertainty and distraction of proxy contests have meant that boards remain willing to enter into cooperation agreements with activists, especially when the activist is willing to accept, or has themselves identified, high-quality independent candidates.

Large, well-known activists made up a smaller proportion of activism activity in 2024, with campaigns by nontraditional activists and first-timers tending to be more unpredictable.

Activists have increasingly turned to CEO change as a catalyst for near-term stock price improvement. Replacing a CEO has always had a much more direct impact on any company than replacing a few directors. Public demands to oust CEOs have always been risky as they create a higher burden of proof for the activist when courting shareholders and can be counterproductive to settlements if a board of directors disagrees with the activist’s assessment. However, the tactical calculus as to whether to explicitly call for a CEO’s ouster, either publicly or privately, appears to have changed – a trend we expect will continue in 2025.

The focus on advance notice provisions remains elevated, with plaintiffs’ attorneys and activists targeting perceived overreach by boards. But these attacks were largely quieted by the Delaware Supreme Court in July, which ruled that advance notice provisions would only be facially invalid if they were “unintelligible,” while also striking down portions of advance notice bylaws that had been adopted in the middle of a multi-year activism campaign. While companies should review their advance notice provisions in light of the new case law, state-of-the-art advance notice provisions remain critical for boards and public shareholders to gain information about activists and their nominees.

The election of President Trump is a boon to activism, with the potential for lighter antitrust scrutiny under the new administration stimulating M&A and deregulation stimulating economic activity. However, even with an improved antitrust environment, whether M&A will return as activists’ favorite demand depends in part on improvements in the credit markets (tied to further rate cuts at the Fed) and whether public valuations continue to accelerate beyond buyers’ willingness to pay.

However, unlike the 2024 “super year” for political elections, shareholder activism has become a year-round and every-year phenomenon. Expect more of the same in 2025.

The views expressed in this article are those of the authors and do not necessarily reflect the views of Sidley Austin LLP, its other lawyers, or its clients.

Link to full report can be found here.