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Barri Rafferty, CEO of Morrow Sodali, a global advisory firm, discusses the increasing cases of shareholder activism in the post-pandemic era. These campaigns are becoming more sophisticated and can impact a company’s strategic plan and governance practices. Rafferty highlights key trends impacting companies, including rising M&A activism, ESG-driven proxy contests, and changing dynamics in retail shareholder support.

M&A activism is on the rise, with shareholders increasingly either supporting or opposing M&A transactions. According to a report by Diligent Market Intelligence, the number of U.S. companies facing opposition campaigns related to M&A increased by 20.8% in the past year. Effective shareholder engagement is crucial for companies preparing for M&A-focused campaigns, as understanding their shareholder base can help gauge expected vote outcomes.

The discourse around ESG-driven proxy contests is shifting, with a recent proxy contest at Starbucks by labor unions marking a potential turning point. While the unions ultimately withdrew their nominees for the board, the contest succeeded in bringing Starbucks to the bargaining table. This case study highlights the effectiveness of using shareholder activism to apply pressure on a company’s labor practices, signaling a potential increase in ESG activism in the future.

Retail investor opposition is also evolving, with the “new” retail investor being more open to opposing ballot items and exerting influence over voting outcomes. Companies can adapt to this changing landscape by engaging with investors proactively and understanding their concerns. By deepening their understanding of retail investors and engaging beyond the usual influential shareholders, companies can better position themselves to win close votes and navigate activist pressure.

In the face of ongoing shareholder activism, companies are advised to engage in continuous dialogue with shareholders, be open to strategic changes, and focus on creating and clearly articulating value. By prioritizing stakeholder engagement year-round and understanding the composition of their shareholder base, companies can adapt and thrive in the current marketplace. Forbes Business Council offers business owners and leaders the opportunity to engage in growth and networking opportunities. Companies should consider if they qualify for membership to access valuable resources and connections.

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