Shareholder activism is a market-driven governance mechanism that pressures companies to close the gap between potential and performance. Over the past decade, the relationship between shareholders and companies has evolved from an episodic exercise into a year-round strategic discipline, with artificial intelligence acting as a significant accelerant. As its influence continues to grow rather than
decline, shareholder activism is becoming increasingly ubiquitous, multidimensional and integrated into mainstream corporate governance.

FW: Could you outline the fundamental purpose of shareholder activism in today’s corporate governance ecosystem?

Glover: The goal of most activists is to achieve positive investment returns for themselves and their investors. They launch campaigns because they hope they can trigger changes that will lift the target company’s share price, or because they want the company to pay a large dividend or engage in M&A transactions that they expect will generate value. Many market observers argue that activist self-interest serves a broader, beneficial purpose. In their view, activists’ pursuit of returns helps improve governance, forces boards to confront flawed strategies and ensures that strategic plans are reevaluated rather than left to run on autopilot. These advocates reason that activists impose discipline in a way that a passive shareholder base cannot. Other market observers take a different view. They argue that activism’s focus on short-term returns is often value destructive. In their view, activists sometimes force boards and management teams to adopt measures that prevent the implementation of strategies that would generate more favourable long-term returns.

Marese: In theory, shareholder activism attempts to serve as a market-driven disciplinary mechanism that aligns corporate management with investor interests, maximises firm value and enforces rigorous organisational accountability. It directly attempts to address the classic principal-agent conflict by empowering shareholders to challenge executive and board of director passivity, strategic stagnation or management entrenchment. Shareholder activism’s key objectives attempt to drive this intervention within the corporate governance structure of a particular publicly trading entity. Activists, for example, may demand operational efficiencies, capital structure adjustments, spin-offs or strategic mergers. Investors may push for enhanced board independence through a refresh of those seated as directors, executive compensation limits and minority voting rights. Campaigns may also focus on environmental, social, and governance (ESG) standards to mitigate regulatory and reputational liabilities. Ultimately, shareholder activism bridges the information asymmetry between corporate insiders and external market participants – ensuring public companies remain transparent, fiscally disciplined and strategically agile for long-term stakeholder benefit.

Tetelbaum: The existence of activism in a market is a testament that the economy has robust capital markets, and that substantial value exists in public companies. Activist suggestions to unlock value tend to concentrate around various forms of financial engineering, such as share repurchases, sum of the parts arguments to break up the company, or trying to get the company put in play. Operational improvements take time, and activists do not tend to have the investment horizons and patience to see them through. A company is served best in being open-minded to suggestions from activists, while staying focused on the purpose and values of the company to the benefit of its value investors.

Lu: Shareholder activism is fundamentally an extension of value investing. Activist investors seek to generate returns, often over a relatively short-term horizon, and their objectives may not always align with the creation of long-term shareholder value. While activists often portray themselves as a necessary source of corporate discipline, research suggests that activist campaigns tend to have a negligible impact on long-term shareholder value. Public companies already face relentless pressure from shareholders and the markets to deliver results. In many campaigns, the ideas advanced by activists are not entirely new and the debate is often less about what should be done than how quickly and how aggressively management should pursue initiatives already under consideration. Activism’s key contribution to corporate governance is that it helps underscore the importance of distinguishing between strategies that generate durable long-term value and those that merely boost short-term returns, and often at a cost to the long-term health of the business.

Herka: Shareholder activism is a central governance tool that pressures companies to close the gap between potential and performance. Activists use ownership rights voting, engagement, proposals and campaigns to question strategy, capital allocation and board effectiveness, often surfacing issues long before they show up in the stock price. From an issuer standpoint, activism is both a risk and an opportunity. Poorly managed, it can distract and destabilise. Managed well, it can catalyse necessary change and sharpen the company’s equity story. Boards should view activism as a signal from the market that something is wrong either from a corporate governance or a performance standpoint.

FW: In your opinion, how has the relationship between companies and shareholders evolved over the past decade?

Marese: Over the last decade, the relationship between companies and shareholders has fundamentally evolved from passive ownership to proactive co-governance. Historically, retail and institutional investors primarily expressed dissatisfaction by selling their shares – a practice known as the ‘Wall Street walk’ or in the context of a proxy vote, ‘vote with their feet’. Today, several major macroeconomic shifts drive this evolution. For example, mega-managers like BlackRock, Vanguard and State Street cannot easily divest. In essence, they have become permanent money within these corporations. The result leads to forcing them to engage directly with boards through their internal stewardship teams. Also, regulatory updates have lowered the structural and financial barriers for shareholders to vote for individual independent directors at contested annual meetings for the election of board directors. Another shift has seen social platforms and environmental mandates give decentralised retail investors and ESG advocates the leverage to run highly public campaigns. Consequently, best practice among modern corporate boards no longer treats shareholder communication as an annual formality.

A company is served best in being open-minded to suggestions from activists, while staying focused on the purpose and values of the company to the benefit of its value investors.

Elina Tetelbaum – Watchell, Lipton, Rosen & Katz

Tetelbaum: The shareholder-company relationship has transformed dramatically over the past decade in a highly positive manner. Companies regularly hold on- and off-season shareholder meetings. Investor relations teams have become remarkably sophisticated, leading to a feedback loop between boards and investors that has become genuinely bilateral. Shareholders raise concerns, companies listen and adapt, and that dialogue has made governance stronger. Investors are top of mind in virtually every boardroom decision, from capital allocation to executive compensation to M&A. Still, this evolution has not and cannot change a fundamental principle of corporate law: the board remains the steward and fiduciary of the enterprise. Directors typically possess information about strategy, operations and competitive dynamics that even the most engaged shareholder does not. It is still paramount for companies to not permit shareholder preferences to substitute for board judgment. The board’s obligation is to listen carefully, but ultimately to exercise its own informed, independent discretion in the long-term interest of the company.

Lu: The biggest change is that shareholder engagement has evolved from an episodic exercise into a year-round strategic discipline. Ten years ago, many companies engaged investors primarily in response to a specific issue. Today, boards and management teams increasingly recognise that strong shareholder relationships are built through year-round dialogue. Companies have learned that maintaining a regular cadence of engagement with key investors helps them identify and address emerging concerns before those concerns become the foundation for an activist campaign. At the same time, institutional investors have become increasingly sophisticated in their assessment of companies, focusing not only on financial performance, but also on strategy, execution, risk oversight, capital allocation and governance. The result is a far more dynamic engagement landscape. Many well-advised companies are no longer simply communicating results – they are building trust and credibility with key shareholders long before a crisis or activist situation emerges.

Herka: Working with issuers of all market capitalisations, we have seen relationships with shareholders shift from seasonal, proxy driven contact to continuous year-round strategic dialogue. Stewardship teams at major institutions now expect regular engagement on strategy, governance and sustainability, not just a once a year meeting around the proxy statement. Activism has accelerated this trend. Boards that experience or observe campaigns often invest in more proactive outreach, perception studies and governance roadshows to reduce surprises later. It is important to treat engagement as part of the yearly governance operating rhythm with clear ownership, investor intelligence and tailored messaging so that when activists appear, companies are not starting from scratch with building relationships with key shareholders.

Glover: Companies have become much more focused on shareholder engagement in recent years, and activists can take at least part of the credit for that shift. Activists have become an omnipresent feature of the corporate landscape, and virtually no company enjoys immunity from activist threats. As a result, most companies have become more disciplined about engaging in a continuing dialogue with their owners. This dialogue better enables companies to determine the extent to which shareholders support corporate strategy and use that information to make adjustments before an activist arrives. Engagement also puts them in a much stronger position to respond if and when an activist appears. If the company has been talking to its shareholders, it can determine much more quickly whether the activist’s arguments are likely to gain traction and will be in a better position to make counterarguments that resonate with shareholders. For these reasons, engagement has moved from being a courtesy to a core strategic function.

FW: How significant is the influence of large institutional investors in determining outcomes in modern activist campaigns?

Tetelbaum: There is a perception of enormous influence, but the reality is subtler. Most activist situations result in settlement. Only a fraction ever reach the point where the large institutional investors cast their votes. More than power and influence, what drives any campaign is uncertainty. A majority of the shareholder vote is decided at the eleventh hour. Few boards can tolerate months of uncertainty while trying to execute on a strategy and retain management. It is that uncertainty, and not necessarily influence, which drives settlements. Index funds remain the last great bulwark against short-termism, as they take a longer-term view in their voting and frequently support management’s strategic vision. Unfortunately, the perception of outsized index-fund influence stands to diminish the voice of index funds. If that stabilising counterweight were weakened, boards would lose a key piece of the shareholder base that enables them to pursue value creation over quarters and years rather than weeks and months.

Successfully engaging activist investors and defending long-term strategy requires boards to recognise that their critical audience is not necessarily the activist, but the shareholder base writ large.

Carmen Lu – Paul, Weiss, Rifkind, Wharton & Garrison LLP

Lu: The largest institutional investors often play a critical role in determining the outcome of modern activist campaigns. At many public companies, the combined ownership of the ‘Big Three’ index fund managers alone represents approximately 15 to 20 percent of the vote – giving them influence comparable to that of proxy advisers. While proxy advisers have historically sided with activists in roughly half of contested situations, the largest index funds tend to evaluate campaigns through the lens of patient capital, focusing on sustainable value creation. They are generally less focused on short-term catalysts and more focused on whether management has articulated a credible long-term strategy, demonstrated strong governance and established a track record of execution. As a result, a company winning the support of large passive investors can significantly narrow an activist’s path to victory. A supportive passive voting bloc can effectively neutralise the influence of proxy advisers or even tip the outcome. This dynamic could become more pronounced as customised voting policies proliferate and voting decisions become increasingly investor-specific.

Glover: Institutional investors play a critical role in almost every activist campaign. Because index and active funds often hold large blocks of shares, their support can tip the balance in a contested situation either way. Historically, many large institutional investors were not especially receptive to activists’ arguments, and would often default to support for incumbent management. That has changed. There are now numerous examples of large institutions siding with an activist when the activist’s arguments make good economic sense. Activists increasingly design their arguments specifically to appeal to a company’s institutional holders and the proxy advisers who guide them. The company, for its part, must continuously monitor what its large institutional investors think. If a challenge is launched and the company believes that the activist positions will resonate with the institutions, the company should move aggressively to explain why it thinks the activist is wrong, or consider making adjustments and concessions.

Herka: In most situations, large institutional investors are the decisive audience in an activist campaign. Their voting influence can either validate an activist’s thesis or reinforce support for the incumbent board. Investors’ priorities and historical voting patterns need to be understood, with engagement shaped and disclosed accordingly. Successful defence or constructive settlement almost always involves winning the confidence of key institutions by demonstrating credible long term strategy, responsive governance changes and a disciplined capital framework. Activists know this too, which is why their materials increasingly mirror the language and focus areas of leading stewardship teams.

Marese: The influence of large institutional investors is absolutely decisive in determining the success or failure of modern activist campaigns. Because activist hedge funds typically hold only 1-3 percent of a target company’s stock, they lack the sheer voting power to force changes unilaterally. Institutional investors shape modern activist outcomes through several key dynamics. First, passive giants like BlackRock, Vanguard and State Street Global Advisors collectively can control a significant number of shares at many publicly trading companies. In many cases, their ownership can be roughly 20 to 25 percent of the shares outstanding. An activist hedge fund, in most instances, cannot win a proxy fight unless it convinces these long-term asset managers that its strategic plan has the potential to generate sustainable, long-term value rather than a short-term cash payout, which is a self-serving outcome for the activist. Second, because corporate boards track institutional sentiment closely, a clear signal that major asset managers favour an activist’s ideas will usually force corporate management to settle privately. Higher levels of institutional passive ownership are statistically tied to an increased likelihood that activists will secure board representation or successfully push for corporate sales via private settlement.

FW: How should boards strike the right balance between engaging activist investors and defending long-term strategy, particularly in the context of first-time activists and increasingly fragmented investor coalitions?

Herka: Our core message to boards is simple: prepare early, engage seriously and defend strategy with data. When activists, including first time entrants, approach, boards should assume the campaign will be scrutinised by sophisticated institutions and proxy advisers. The first step is an honest internal assessment of performance and vulnerabilities, followed by structured dialogue that separates legitimate concerns from purely opportunistic demands. We help clients build playbooks that outline when to listen, where to compromise and how to explain decisions to the broader shareholder base. The goal is to refine the long term plan where warranted, while resisting pressure that would undermine resilience or push the company into unsustainable financial engineering.

Marese: To balance activist engagement and long-term strategy, boards must shift from a reactive defence to proactive, data-driven relationship management among its various ownership constituencies. To that end, boards should track individual stewardship guidelines within fragmented investor bases and avoid treating institutional holders as a monolith. The impact of proxy advisory services, such as Institutional Shareholder Services and Glass Lewis, upon voting outcomes must be understood. Boards need to maintain independent director dialogue with core long-term shareholders outside proxy season to secure their trust early. Also worth developing is a retail-focused investor relations programme, where such ownership is a key voting bloc. Objective, outsider-style audits can be conducted to pressure-test operational performance and identify valid criticisms before activists do, while activists can be screened to separate high-value strategic insights from short-term noise. Boards are also well-advised to defend the long-term plan with transparent, measurable milestones that prove its superior value over immediate breakups or other financial engineering.

Glover: The right answer varies case by case. The target company’s board must assess the activist itself. Who is it and what is its playbook? How aggressive will it be? Is it willing to engage in proxy contests or does it tend to work constructively with management? The board must also assess the arguments that the activist is making and whether they will appeal to the company’s shareholders. A board may need to consider departing from its long-term strategy when it knows that an activist is likely to apply significant pressure and is making a case that shareholders may find persuasive. Ultimately, the board’s duty is to make decisions that the directors reasonably believe are in the best interests of the company and its shareholders. If the activist makes a compelling argument that adjusting company strategy will better serve shareholders, the board should give that argument serious consideration rather than defend the status quo reflexively. Even if the merits of the activist’s position are debatable, the board must take into account the corrosive impact of an extended battle with the activist and determine whether it is better to bear that impact or make concessions.

Lu: Successfully engaging activist investors and defending long-term strategy requires boards to recognise that their critical audience is not necessarily the activist, but the shareholder base writ large. While some activists may be open to persuasion, others may have firmly established views shaped by a mandate to deliver short-term returns. Accordingly, successful engagement can be less about changing an activist’s mind than ensuring the activist understands that the broader investor base remains confident in the board’s strategy. If shareholders remain confident in the board’s and management’s vision for long-term value creation, a campaign or proxy contest becomes far less likely to succeed. This approach is particularly important when dealing with first-time activists, as they often lack the track record, credibility and investor relationships that established activists have built over time. Boards that effectively communicate with their broader shareholder base can often make it difficult for a first-time activist to gain the support necessary to build momentum behind a campaign.

Tetelbaum: Understanding how an activist views a company is a valuable exercise for boards – the so-called ‘be your own activist’ advice. But that should not result in boards substituting their own judgment for measures designed primarily to pacify an activist. Board composition, capital allocation and broader strategy are all matters in which reasonable minds can and do differ. One of the greatest innovations of corporate law is the business judgment rule, and the willingness to defer to the judgment of a well-informed, unconflicted board on key strategic matters. A board must be prepared to defend its views if, after thoughtful evaluation, it concludes that an activist’s proposals would sacrifice long-term value for near-term returns. A board that invests in year-round shareholder engagement – long before an activist ever shows up – has an easier time convincing investors to trust the board’s judgment, even in the face of an underperforming track record.

FW: What explains the growing preference for private engagement and fast settlements over public proxy battles – and is that trend sustainable?

Marese: The shift toward private engagement and fast settlements is driven by several factors, chiefly universal proxy rules, soaring costs and corporate risk aversion. Under universal proxy regulations, board elections can be highly unpredictable. This uncertainty is pushing companies to settle early. Public battles can potentially cost millions and be deeply distracting to management. Consequently, most activist board seats are now won via swift, behind the scenes agreements – often in under three weeks – rather than prolonged proxy contest campaigns culminating in public shareholder votes. However, this trend faces sustainability challenges. Institutional investors increasingly push back against these ‘backroom deals’, arguing they sideline the broader shareholder base and lack adequate transparency. Furthermore, quick settlements often prioritise short-term peace over fixing deep operational flaws, sometimes resulting in repeat activism, multi-year campaigns.

Over the last decade, the relationship between companies and shareholders has fundamentally evolved from passive ownership to proactive co-governance.

Bob Marese – MacKenzie Partners, Inc.

Glover: From the company’s perspective, proxy battles are enormously expensive and deeply disruptive. They consume lots of time and attention and carry significant reputational risk. Moreover, outcomes are difficult to predict. Even when the board believes that an activist challenge is misguided, it must consider the risks and costs of engaging in a proxy battle. The activist faces a similarly difficult decision. It also must take into account the fact that it will incur large costs, and the risks that its reputation may be damaged and that its efforts may not be successful. Universal proxy rules have sharpened this calculation. They make it easier for an activist to secure an individual seat or two on a company board but harder to sweep a full slate. Faced with so much uncertainty, both sides often feel significant pressure to settle rather than gamble on a vote.

Lu: The simple answer is cost and efficiency. Most companies and activists would rather spend their time creating value than fighting a proxy contest. Proxy contests are expensive and distracting, and the outcome is often uncertain. Activists recognise that constructive engagement can achieve many of the same objectives as a public campaign, while boards have become increasingly willing to consider settlements when terms are reasonable and doing so serves shareholder interests. This trend is sustainable – but only up to a point. Proxy contests remain an essential resolution mechanism when there are fundamental and irreconcilable disagreements between the activist and the company. And the credible threat of a proxy contest is what gives private engagement its force. One consequence of this settlement-driven environment has been an increase in multi-year campaigns. Because settlements often reflect compromise, activists may return in subsequent years to pursue objectives they did not fully achieve. Activism today may be less public, but it can be more persistent.

Tetelbaum: Most well-advised companies today are conducting year-round vulnerability analyses with their financial and legal advisers – rigorously pressure-testing their strategy, capital allocation, portfolio and board composition. Because of this work, if an activist does surface, there is often less daylight between the company and the activist than the public narrative would suggest or may have been the case historically. The activist is frequently knocking on an open door, in that the company has already identified the same operational improvements or governance enhancements and is working through the timing and sequencing of execution. In those circumstances, a costly, distracting and protracted public proxy fight over ideas that are fundamentally in sync is value destructive for everyone and thus leads to private engagement and faster settlements. The best outcomes are the ones nobody reads about.

Herka: We see a strong preference for private engagement and negotiated resolutions, driven by pragmatism on both sides. Boards recognise that prolonged public contests consume management time, amplify uncertainty and can damage stakeholder relationships, while activists understand that quiet, credible settlements can deliver faster, more certain outcomes. Institutional investors often favour this path, provided they see genuine responsiveness and governance improvement. The role of proxy solicitors and legal advisers is to help clients use private channels to test ideas, adjust board composition, refine capital plans and improve disclosure without appearing defensive or secretive.

FW: To what extent is market volatility reshaping activist strategy? Does it create opportunity or force caution?

Herka: Across campaigns, we see volatility creating both openings and constraints. Dislocated valuations and stressed capital structures can make some companies prime targets, allowing activists to craft compelling ‘value gap’ narratives. Yet uncertain macro conditions also make investors more cautious about aggressive restructurings or highly leveraged strategies. Boards can use volatility to proactively revalidate their strategy, capital allocation and investor messaging. When activists appear, companies that can clearly distinguish structural underperformance from market-driven noise are better positioned to persuade institutions that their plan appropriately balances risk and opportunity.

Lu: Market volatility can be a double-edged sword for activists. While volatility can create more potential targets, it may also force greater selectivity and patience. Depressed or dislocated share prices can create attractive entry points because activists are fundamentally value investors. But for a company to become an attractive activist target, there must also be a clear and credible path to value creation. Volatile markets can make that path much harder to identify. Shifting macroeconomic conditions, fluctuating financing markets and changing investor sentiment can make it difficult for activists to determine which objectives will resonate with shareholders and be realistically achievable. Volatility can also blur accountability. When performance is affected by broader market forces, it becomes harder for activists to lay blame squarely at the feet of management and the board. That, in turn, can make it more difficult to build investor support for change and pressure companies to take decisive action.

Tetelbaum: Market volatility is the new normal – or perhaps, more accurately, the new abnormal. On the one hand, volatility makes it harder for activists to feel confident in the return profile of any given investment. But more often, volatility is opportunity under another name. Activists build positions when they deem a stock to be undervalued, and volatility makes an entry price even more compelling. Depending on when the economic entry point aligns with the proxy calendar, an activist may be a day from the nomination deadline or months, and campaign tactics differ based on timing realities. For companies, a low stock price is a moment of peak vulnerability, especially if that price is dislocated with respect to peer performance or dislocated from the fundamental value of the company.

Activists have become an omnipresent feature of the corporate landscape, and virtually no company enjoys immunity from activist threats.

Stephen I. Glover – Gibson, Dunn & Crutcher LLP

Glover: Volatility makes life more difficult for both targets and activists. On the company side, volatility makes it harder for a board to discern long-term trends and defend the strategic case with confidence. For example, if the stock price drops, should the board make major changes to reduce its vulnerability to an activist challenge? If the stock price goes up sharply after an activist challenge is launched, should the board interpret the increase as a sign that investors strongly support the challenge or as a product of other market forces? How does the board judge what is in the shareholders’ best interest when the near-term signal provided by the stock market is so noisy? Volatility also complicates the activist’s decisions. For example, if the activist establishes a position in a target when the stock price is low and the price then moves up, it faces a dilemma: should it continue to maintain its investment position or claim victory, sell and walk away? Volatility creates openings for both activists and companies, but it can also punish them if they misread a temporary move for a lasting one.

Marese: Market volatility heavily fuels activist strategy by primarily creating valuation discrepancies and strategic entry points into publicly traded stocks – though it can also concurrently force a measured, highly selective degree of caution regarding deal execution and prolonged proxy fights. In terms of opportunities, market dips expose mispriced small- and mid-cap companies, giving activists cheap entry points into these stocks. In addition, frustrated directors struggling with depressed stock prices can be more open to strategic alternatives or outright sales proposed by an activist. And increasingly, activists are leveraging volatility to push for corporate carve-outs, pure-play separations and asset sales rather than messy operational turnarounds. On the flip side, contested board seats have grown harder to win outright amid shifting voting landscapes. Instead of hostile proxy showdowns, funds favour quiet, year-round negotiations and early settlements to mitigate macro unpredictability.

FW: How do you see shareholder activism evolving over the next five years?

Lu: Artificial intelligence (AI) is likely to accelerate activist activity while lowering barriers to entry. AI is making it easier to analyse disclosures, identify vulnerabilities and develop sophisticated campaigns at a fraction of the historical cost. Consequently, we may see an increase in the number of smaller activist investors deploying AI to help launch campaigns at public companies. Of course, the reverse is also true: companies will be able to deploy AI to help develop more sophisticated assessments of their vulnerabilities and response strategies. Second, as proxy fights remain costly and disruptive, and as the growing adoption of customised voting policies increases uncertainty around the outcome of a contest, we will likely continue to see a preponderance of activist campaigns result in settlements or ongoing engagement that stretches beyond a single proxy season. In short, activist campaigns may become lower-octane but more persistent. Activists will also continue exporting their playbook internationally, pursuing opportunities in markets where governance and valuation gaps remain significant and the potential for value creation is compelling. As shareholder rights and governance standards continue to evolve globally, activists are likely to find an expanding universe of opportunities beyond the US.

Tetelbaum: I expect that over the next five years, activism will be the same story but with a somewhat different cast, as more activists put out their shingles and seek to run the activist playbook on public companies. For those that are not sufficiently well-resourced at the outset, I would expect to see the continued use of withhold campaigns for activists to apply pressure without ever fielding a slate. Ultimately, unless companies are able to persuade value-oriented investors that activist tactics are not aligned with long-term value creation, the activist universe will keep broadening. The distraction, disruption and expense of activism will continue unabated. Activism will remain a permanent feature of public markets requiring constant vigilance by boards and management teams.

Glover: The trajectory points to more of what is already emerging rather than a sharp break. Activism is more likely to grow than diminish. Large activist funds will continue to play a significant role, launching high-profile campaigns. But the proliferation of smaller activist funds and funds pursuing activist strategies for the first time will also continue. Settlements will remain the default route to resolution, given the cost and uncertainty of contested fights. Companies’ focus on shareholder engagement and activism preparedness will increase as companies seek to deepen their engagement with their owners. Activists will adjust their strategies over time, depending on market conditions. For example, when the M&A markets are hot they will be more likely to press for value generating M&A transactions. The specific economic sectors that activists target will also shift over time.

Marese: Over the next five years, I believe shareholder activism will become more sophisticated, global and technology-driven. Among the core drivers of this evolution will be an increasing number of activists launching campaigns against large-cap corporations, using advanced data analytics and screening tools to find vulnerabilities in companies previously considered too large to challenge. I also expect to see campaigns being tied directly to M&A in an attempt to force companies to break up, divest underperforming assets or seek premium buyers. The technology and financial services sectors, I believe, will see a surge in campaigns targeting capital allocation, operational efficiency and AI integration. All sectors will face some level of AI scrutiny from activists. At the same time, regulatory reforms and corporate governance mandates in markets such as Japan and South Korea will accelerate international growth, making activism a truly global phenomenon. Ultimately, companies must adopt an ‘always-on’ activist mindset, proactively addressing operational, financial and governance gaps before outside funds intervene.

Dislocated valuations and stressed capital structures can make some companies prime targets, allowing activists to craft compelling ‘value gap’ narratives.

Tyler Herka – Alliance Advisors

Herka: Activism will become more ubiquitous, multidimensional and integrated into mainstream governance. We expect a broader mix of players using AI to uncover vulnerabilities generating more campaigns to influence corporate direction. Themes will continue to expand beyond classic M&A and capital structure to encompass climate strategy, human capital, political exposure and digital risk. For boards, this means activism preparedness cannot be an occasional exercise; it needs to be embedded into investor engagement, board evaluations and succession planning. We are increasingly seeing a focus on building ‘activism resilient’ boards and narratives so that when campaigns surface, they are meeting an already engaged, well prepared governance structure rather than a reactive one.

The idea that shareholder engagement should extend beyond the annual meeting window is not new. For decades, leading companies have understood that meaningful investor relationships require more than a compressed spring sprint.

What is new is the speed, sophistication and stakes of that engagement. Activists are better resourced, better organised and better informed than ever before. Index giants have built institutional stewardship operations that dwarf most investor relations (IR) departments. Artificial intelligence (AI) is arming both sides of the table with capabilities that barely existed three years ago.

The question for corporate leadership is no longer whether to engage year-round, it is whether their engagement infrastructure is truly built for what modern activism demands.

The changing shape of proxy season

The traditional proxy season has not disappeared, but it has been hollowed out as a primary battleground. Shareholder proposals are falling sharply, and the percentage reaching an actual vote continues to decline.

In 2025, ExxonMobil received zero shareholder submissions for the first time in 25 years. Apple and John Deere recorded similar drops. On the surface, this might suggest shareholder pressure is easing. The reality is precisely the opposite.

What these numbers reflect is a migration of shareholder influence away from the annual meeting and into the 11 months surrounding it. Institutional investors increasingly prefer to address sensitive or complex governance matters outside the compressed proxy window, through direct bilateral engagement, quiet pressure campaigns and behind the scenes negotiations that never produce a public vote but can result in board changes, strategic pivots or chief executive departures.

The proxy season vote has become, in many cases, the last resort reserved for companies that failed to engage meaningfully before the window opened.

Why the pressure is intensifying

Understanding why year-round engagement has become an activism-preparedness imperative requires looking at both the structural forces pushing companies toward continuous dialogue and the strategic incentives pulling them there.

On the push side, the dominance of institutional capital has made the old model untenable. Asset managers alone now hold approximately 65 percent of listed US equities. These are not passive observers. They employ dedicated stewardship teams, publish detailed voting policies and conduct year-round monitoring of their portfolio companies.

BlackRock Investment Stewardship alone conducted over 2500 engagements with boards and management teams through the 2024-25 proxy year. For companies that assume index investors will simply vote with management because they cannot sell, the recent record tells a different story and activists know it. Convincing a major index fund that incumbent management is underperforming its mandate has become a core tactic of modern campaigns. Regulatory evolution has compounded the pressure. Dodd-Frank’s say on pay provisions established the precedent that shareholders now have a legitimate, institutionalised voice in compensation decisions.

More recently, as the Securities and Exchange Commission (SEC) has moved away from issuing no-action letters on shareholder proposals, the dynamic has shifted toward direct negotiation before the proxy season begins. Companies that are not at the table year-round risk finding themselves at a disadvantage when activists are already deep into conversations with their largest holders.

Activism itself has grown in scale and ambition. There were 297 shareholder activism campaigns globally and 173 in North America in 2025 alone. Modern campaigns rarely arrive as a surprise – they are the product of months of research, holder canvassing and narrative-building.

Companies that use data driven real time stock surveillance tools, detect activist accumulation early and engage proactively, consistently achieve better outcomes than those that mobilise only once a Schedule 13D filing or a public letter forces their hand. Year-round engagement is not just relationship management, it is threat intelligence.

On the pull side, executives themselves have become more comfortable as public advocates for their companies’ strategies. The model of the reticent executive managing a firewall between the boardroom and the investor base is giving way to leaders who understand that authentic, consistent investor engagement builds a credibility reserve that pays dividends precisely when an activist attack arrives. With 58 percent of chief executives now viewing external engagement as a core function of their role, this shift is structural, not anecdotal.

Data-driven surveillance platforms can surface ownership changes before they appear in public filings. Secure messaging and digital engagement portals have made bilateral outreach scalable in ways it was not a decade ago.

« Measuring the right outcomes matters as much as executing the right activities. The temptation to track meeting volume or email open rates as proxies for engagement quality is understandable but misleading. »

The AI factor: accelerant and equaliser

No technology is transforming shareholder engagement faster or more consequentially than AI. Among institutional investors, 53 percent say AI is actively influencing their decision making.

The implication is stark: companies that are not deploying AI in their engagement operations are operating at an informational disadvantage relative to both sophisticated activists and the institutional holders those activists are attempting to mobilise.

Applications are numerous and compounding. On the intelligence side, AI enables real time sentiment analysis across investor communications and digital channels, identifying emerging concerns well before they crystallise into proposals or campaign announcements.

On the communication side, activists are using the same tools to analyse proxy disclosures at scale, assess pay for performance alignment and evaluate board responsiveness. The companies best positioned to defend themselves are those that treat AI not as a future consideration but as a current operational requirement, embedding it into their year-round engagement infrastructure now.

Opportunity in constant engagement

For companies that have built genuine year-round engagement capability, the strategic advantages extend well beyond defence.

Proactive engagement closes the information gaps that produce analyst surprises and valuation volatility. It creates the conditions under which complex strategic initiatives such as M&A, capital allocation shifts and portfolio restructuring can be framed and socialised before they require shareholder approval.

Companies like PepsiCo and Bank of America have placed continuous engagement at the centre of their corporate strategies precisely because they have experienced its value not just as risk mitigation, but as a driver of institutional loyalty and strategic execution.

Nestlé’s years-long engagement with ShareAction produced improved nutritional reporting and positioned the company ahead of a regulatory and consumer trend toward health transparency. These are not proxy season outcomes. They are the results of engagement strategies built to operate across the full calendar.

The potential further erosion of quarterly reporting requirements and the SEC’s signalled movement toward biannual earnings disclosure would make thematic, year-round communication even more important. Companies that have built the infrastructure for continuous dialogue will be far better positioned to manage the information environment in a world where structured reporting windows grow less frequent.

Building an activism-ready engagement operation

Translating the year-round engagement mandate into operational reality is where many companies still struggle. Expanding from a one-month sprint to a 12-month programme is not simply a matter of scheduling more meetings. It requires a rebuilt engagement architecture.

The foundation is shareholder intelligence – continuous, not periodic. Companies need real-time visibility into ownership changes, activist accumulation signals and shifts in institutional sentiment. Stock surveillance tools capable of surfacing this intelligence before it becomes public are no longer a competitive advantage, they are a baseline requirement for activism preparedness. Without this foundation, all other engagement activity is reactive by definition.

On the engagement itself, companies use their proxy solicitor and IR firm to build a structured annual calendar that maps every material communication event – earnings, investor days, environmental, social and governance updates, governance disclosures and strategic milestones – assigning intentional engagement objectives to each. Flexibility is essential, as activist developments or market events will require rapid pivots, but the underlying structure ensures that no six-week stretch passes without meaningful touchpoints across key holder segments.

Engagement must also be calibrated to audience. Institutional investors with active governance mandates require substantive bilateral dialogue on strategy, capital allocation and board composition, not press releases. Retail holders, an increasingly important constituency as platforms democratise market participation and the global retail market projects toward $107 trillion by 2030, require mobile-friendly communication that makes complex corporate narrative legible. Activists, whether engaged or latent, require a company that has already told its story convincingly to the holders an activist would need to persuade.

Measuring the right outcomes matters as much as executing the right activities. The temptation to track meeting volume or email open rates as proxies for engagement quality is understandable but misleading. The metrics that matter are whether voting outcomes are improving, whether activist campaigns are being deterred or neutralised earlier, and whether institutional holders are demonstrating increased confidence through their voting and continued ownership. Year-round engagement that cannot demonstrate these outcomes is, at best, expensive relationship maintenance.

Looking ahead: engagement as competitive advantage

The evolution of year-round engagement is not approaching a steady state. Several developments will continue reshaping the landscape and the demands it places on companies.

The rise of micro-engagements such as informal surveys, fireside chats and targeted digital outreach are making shareholder communication both more frequent and more granular. Companies like Microsoft are integrating investor sentiment feedback into ongoing IR processes rather than waiting for formal meeting cycles. This approach generates earlier warning signals and builds the kind of holder familiarity that makes activist narratives harder to land.

Retail investor influence will continue growing. Platforms like Robinhood have already demonstrated that retail holders can be mobilised both for and against management. As younger, digitally native investors increase their market participation, companies that have built infrastructure for accessible, ongoing retail communication will hold a meaningful advantage over those still relying on the annual report as their primary retail touchpoint.

And technology will continue to advance the possible. Digital proxy voting platforms, AI-powered surveillance tools and real-time disclosure analytics will further compress the window between an activist’s first move and a company’s ability to detect and respond to it. Companies that are continuously building and refining these capabilities will not merely be better prepared for activism, they will be operating in a fundamentally different competitive posture than those still treating engagement as a seasonal exercise.

The proxy season will remain a critical inflection point. But for companies serious about protecting their ability to execute strategy on their own terms, winning the annual meeting begins with the work done in the 11 months before it.