Occasional Activists: Shaping Corporate Governance in 2024

In our previous client alert, The Rise of the “Occasional Activist,” we discussed the increase in shareholder activism through 2022 by “occasional activists” – investors who are not funds dedicated to activist strategies or who do not regularly employ activist tactics, such as institutional investors and individuals, including company insiders.[1] Since then, the trend of increased occasional activism has continued as these investors have leveraged their growing influence to advocate for changes to public companies’ corporate governance and operations.

According to Barclay’s H1 2024 Review of Shareholder Activism, the number of activist campaigns in 2024 is on pace to exceed that of 2022 and 2023, the busiest two-year period on record.[2] In the first half of 2024, there have already been 147 total campaigns, with a record 86 campaigns in the second quarter alone. The increased activity appears to be “largely the result of a 100% increase in APAC activity (50 campaigns vs. 25 YTD in 2023) driven primarily by Japan (38 campaigns YTD vs. 14 in 2023).”[3]

Notably, while the top 10 busiest activists accounted for 46% of the campaigns launched in 2023, only 33% of the campaigns were launched by the top 10 activists in the first half of 2024.[4] At the same time, the percentage of campaigns launched by “first-timers” in H1 2024 was 19%, as compared to 13% over both 2022 and 2023.[5]

Taking the place of the large, dedicated activists are occasional activists like institutional investors and individuals, including founders and current or former company insiders. As institutional investors have grown in size, they have become major shareholders in many companies, giving them a significant voice in corporate decision-making and greater leverage to push for changes they believe will benefit the company and its shareholders. At the same time, the rise of online trading platforms and social media has made it easier for individuals to organize and advocate for changes. Directors and officers of publicly traded companies, who are typically seen as being aligned with the interests of the company’s management, have also become more vocal in their efforts to push for changes.

Occasional activism has taken many forms, including submitting shareholder proposals, launching proxy contests, engaging with company management and board members, and publicly voicing concerns and recommendations. The following are some recent examples.

• Mithra Pharmaceuticals: François Fornieri, founder and major shareholder of Belgian women’s health company Mithra Pharmaceuticals, after stepping away in 2022, returned in October 2023 as part of a group of concerned shareholders. At a special meeting, he successfully removed four of Mithra’s directors and appointed another former director, Jacques Platieau, to the company’s board.
• RumbleOn: In 2023, former Chief Operating Officer and Director of RumbleOn, Mark Tkach, and former Executive Vice Chair William Coulter, together holding about one-third of RumbleOn’s Class B common stock, launched a proxy contest to elect four candidates at the upcoming annual meeting. After a three-month campaign, which delivered some enhancements to the company’s corporate governance practices and board refreshment policy, a settlement was struck just four weeks before the 2024 annual meeting, naming Tkach as the interim CEO and Coulter as a board observer.
• Spectral AI: Spectral AI’s largest shareholder, Erich Spangenberg, who was on the company’s board for more than a decade until 2022, launched a successful campaign in 2023 to bring back former CEO and co-founder Michael DiMaio. Spangenberg himself was also later appointed to the board to serve as chairman of the company’s Executive Committee and Nominating and Corporate Governance Committee. He was also recently appointed as the CEO of the company’s healthcare IP-focused subsidiary, Spectral IP, to prepare that subsidiary for a potential spin-off.
• Crown Castle: Earlier this year, Crown Castle’s co-founder Ted Miller launched a proxy contest seeking to elect himself and three other individuals, including his son-in-law, to the board. He envisioned selling the fiber business and making Crown Castle a pure-play wireless tower company, as part of his plan for the company. Miller, via his investment vehicle Boots Capital Management, LLC, also filed a complaint in the Court of Chancery of the State of Delaware to invalidate the cooperation agreement between the company’s board of directors and Elliot Investment Management, an activist investment fund. While Crown Castle shareholders ultimately rejected all four candidates put forward by Miller and elected all 12 of the company’s nominees to the board, Miller achieved an initial win through litigation by making the company drop Steven Moskowitz, a new director nominee, from the annual meeting slate.
• SoftwareONE: In April 2024, three founding shareholders controlling around 29% of SoftwareONE sought to vote out the board of directors and pave the way for a takeover. SoftwareOne and the founding shareholders ultimately reached a compromise recommending the election of “a proportionate number” of the founding shareholders’ nominees to the board, resulting in three board seats for those nominees.

In our previous article, we noted that the increase in occasional activism could accelerate due to the amendments to the proxy rules adopted by the U.S. Securities and Exchange Commission (SEC) requiring the use of a “universal proxy card” (UPC). With shareholders able to cherry-pick nominees from competing slates, it seemed more likely that dissidents would win minority representation. Under the new UPC rules, shareholders previously reticent to use all their votes on a short slate of director nominees can now make use of all their votes, using some for the dissident’s short slate and some for company nominees.

As it turned out, the data from 2023 shows that the outcome of proxy fights, including dissident wins and the proportion of proxy fights resulting in formal settlements, remained relatively consistent with 2022.[6] Overall, while the UPC rules appear to have streamlined the voting process, their impact on the broader activism landscape and proxy fight costs was less dramatic than expected in their initial year of implementation.

However, the UPC rules seem to have had a noticeable impact on (i) the number of founder proxy fights and (ii) the speed of settlements. The number of proxy fights involving company founders nearly doubled, from four in 2022 to seven in 2023, indicating that founders may be leveraging the new rules to regain influence or control within their companies.[7] Additionally, the data shows that proxy fights are settling faster under the UPC rules, with a median time-to-settlement of 73 days in the first half of 2024 as compared to 86 days in 2022.[8] This suggests that the UPC rules may be providing dissidents with increased leverage, leading to quicker resolutions in proxy contests.

In conclusion, the landscape of shareholder activism continues to evolve, with a notable rise in campaigns led by occasional activists such as institutional investors and company insiders. This shift underscores a broader democratization of activism, fueled by changes in proxy rules and the increasing influence of major shareholders in corporate governance. The introduction of the UPC rules has particularly emboldened company founders, nearly doubling their involvement in proxy fights. This suggests that these founders are increasingly viewing the new proxy rules as a tool to assert or regain influence within their companies. Moreover, the faster settlement of proxy contests under the new rules indicates that these changes are not only altering the dynamics of specific campaigns but are also reshaping the overall strategy and outcomes of shareholder activism. This trend towards more diverse and rapid activism, spearheaded by occasional activists, is likely to continue shaping corporate governance in significant ways.

[1] The Rise of the “Occasional Activist”.

[2] Barclays Shareholder Advisory Group, H1 2024 Review of Shareholder Activism.

[3] Id.

[4] Id.

[5] Id.

[6] A Review of Proxy Fight Outcomes Under the Universal Proxy Rules.

[7] Barclays Shareholder Advisory Group, H1 2024 Review of Shareholder Activism.

[8] A Review of Proxy Fight Outcomes Under the Universal Proxy Rules.