The first quarter of 2022 is the most active quarter ever for shareholder activism, according to investment bank Lazard, which counted 73 new campaigns launched worldwide, compared with 59 in 2020 and 55 in 2021 over the same period. This 40% year-on-year increase can be attributed to the recognition that private discussions with the management of large listed companies are not having the expected effect. And to the collateral effects of new rules, such as the Sustainable Finance Disclosure Regulation (SFDR) in Europe.

Shareholder activism is an attempt by a minority shareholder to influence the governance or strategy of a company. The method? Obtaining as many proxies as possible to participate and influence shareholder meetings.

Very popular in the United States and in the Anglo-Saxon world, the practice is now spreading to Europe. 60% of new campaigns, representing 55% of invested capital, took place in the United States. 21% of the campaigns took place in Europe compared to 29% last year, representing 38% of the capital invested, a proportion that remained stable from one year to the next.

The UK remains the country where the practice is most widespread, followed by France and Italy. The attacks on Orpea and Total Energie explain France’s second place, which appears to be a temporary phenomenon in a country that is not used to such moves. The practice is also gaining in importance in the Asia-Pacific region, where 16% of the campaigns recorded in the first half of the year took place, representing 6% of the capital invested.

Greening of general meetings

On the fund side, the purpose of campaigns is varied.

While traditionally “financial” purposes--such as taking a position in a takeover deal--have taken precedence, environmental, social and governance (ESG) issues are now becoming more important. Two factors can be put forward to explain this phenomenon: the European taxonomy which now gives the issue greater visibility on this side of the Atlantic and the adoption by the US Securities and Exchange Commission on the other side of the Atlantic of a change in proxy rules which lowers the barriers to entry for nominations from traditional activists and other interest groups, e.g., climate and social activists or employees.

The SEC has also limited the ability of companies to block resolutions calling for corporate action on environmental or socially significant issues.

With the growing number of environmental and social proposals being submitted to US shareholder meetings, ESG scrutiny of public companies continues to intensify, notes Lazard. The investment bank says the wave is expected to grow with the expected adoption by the SEC of a regulation equivalent to the European SFDR, the broad outlines of which were unveiled in March.

The example of Carl Icahn testifies to this shift. The financier known for having tried to influence the strategy of large groups such as Yahoo, Dell and HP, and who launched four campaigns during the first quarter, has distinguished himself in non-financial battles. In his worst books are McDonald’s and animal abuse.

In the first quarter, 40% of the campaigns were aimed at board changes. Activist shareholders won 38 board seats, 37 of which were done “amicably”.

Originally published in French by and translated for Delano