Strike First

Companies are showing a greater willingness to fight back against activist investors—and in many cases they are winning.

Get ready to rumble. 

Amid an increase in activist-investor campaigns, companies are showing a revived willingness to fight back—and to strike first. Already this year, one high-profile effort from investors was called off, another challenge to a board seat was denied, and an additional campaign hangs in the balance. These cases track a pattern that started last year, when activist campaigns that ended in settlements (as opposed to wins) declined for the first time since the pandemic. According to a Harvard Law report on shareholder-activism trends, 25% of completed campaigns ended in settlement, down from 29% in 2021 and 32% in 2020. 

Joseph Griesedieck, managing director of the Board and CEO Services practice at Korn Ferry, says that many leaders, having steered their companies through the pandemic, are emboldened in the conviction that they have the right strategies in place. “Some leaders have taken the position that they are doing the right things, and they are going to fight,” says Griesedieck. 

The data shows that as well. The report found that even when a settlement was reached, it took longer than in past years. More than 20% of settlements took six months or longer to be concluded. By comparison, no settlement took that long last year, and only 2% did in 2020. One factor, experts say, is that activists are targeting bigger, better-funded companies and making more complex demands—leading to longer and more costly campaigns. “It makes it more expensive and difficult to mount a successful campaign,” says Griesedieck. 

Companies have also gotten better at shareholder outreach and investor relations, which has created more alignment on key issues, says Peter McDermott, a senior client partner in the Global Corporate Affairs and Investor Relations practice at Korn Ferry. As a result, companies are proactively cutting costs, pursuing mergers and acquisitions, reinstating dividends, instituting ESG metrics, and more. “Companies are adapting before the activism comes,” says McDermott. 

But that doesn’t mean that activists aren’t winning their fair share of campaigns (or abandoning them after companies have agreed to meet their demands). According to data from investment bank Lazard, activists won 108 board seats last year, a 21% increase over 2021. 

Moreover, despite what proxy-voting data provider Insightia calls an “extended run of defeats in marquee campaigns,” activist actions are only expected to increase. Last year, activist investors launched 929 campaigns worldwide, a 6% year-over-year increase, with more than 800 of them against US companies. At 21% of all campaigns, the tech sector attracted the most activist attention; sharp stock-price drops, declining performance, and bloated structures made the industry vulnerable to activist investors in a way it never was before. Other industries attracting more than 10% of activist activity include industrials, consumer, financial institutions, and energy. 

Experts anticipate this year will see activist investors launch even more campaigns. Changes to the voting rules for board directors now allow activists to target individual directors for removal, for instance. Another regulatory change—a requirement for more detailed reporting on actual versus realized pay for CEOs—could bring unwanted attention to compensation practices. At the same time, the macroeconomic outlook is slowing, supply-chain issues persist, and new technologies are accelerating business transformation. And issues like sustainability, diversity, and talent are only growing in importance. 

With activist attention coming from everywhere, sometimes all at once, Griesedieck advises leaders to stay on the offensive. “Activists are going to keep going after companies,” he says. “Leaders can’t go back to taking the ostrich approach and putting their heads in the sand.”


For more information, contact Korn Ferry’s Board & CEO Services practice.