Activism Has Gone Mainstream. How Can CEOs Respond?

Steve Odland: Welcome to C-Suite Perspectives, a signature series by The Conference Board. I'm Steve Odland from The Conference Board and the host of this podcast series. And in today's conversation, we're going to discuss the latest research from The Conference Board on shareholder activism.

Joining me today is Matteo Tonello, the head of TCB's Benchmarking and analytics, and Matteo, you have been doing this study for a very, very long time, studying trends on the proxy voting, activism, and so forth. So, welcome to the program.

Matteo Tonello: Hi Steve. Thank you. Thank you for having me.

Steve Odland: Yeah. So your report is always fascinating to me, and I know it's fascinating to everyone in the C-Suite, board members, and everybody in the governance community, cause it documents the latest information, what's happening out there in proxy voting and activism and so forth. But just before we start, just tell us briefly, how do you do this study? Where do you get the data? And so forth.

Matteo Tonello: Yes. So we've been tracking shareholder activism and shareholder proposals for a very long time, and it's part of really the commitment of The Conference Board to track corporate practices and investor practices to inform our members and ensure that they have all the information that is really necessary to make informed decisions.

And the data that we use for these studies, for this and others, is all publicly disclosed data. So in this case, we look at proxy statements, and we look at filings, proxy contests, what are called exempt solicitations, announcing communications by shareholders to companies related to corporate matters. But everything comes from corporate filings, which we organize into structured databases and then use to extract statistics, use them for our research.

Steve Odland: Yeah. And so these are real numbers. These are real facts. And we come at this agnostically, we're not supporting one side or the other. We're just trying to report it as it's going on. So give us the headline regarding shareholder activism, and it's US-based, but what's going on, and how's it evolved?

Matteo Tonello: Yeah, so like I said, we've been doing this for quite some time. This year, we tried to specifically to look at the most recent evolutions and how activism has changed over the course of the last few years. And I think that the headline, you asked about the headline, it's that activism is a phenomenon that has gone mainstream in the last few years. It used to be at the fringe of the investment world. It has now developed into an investment strategy on its own, with a growing population of players, of activist investors.

And there are three main research findings that point in this direction. The first one is the volume of activism campaigns. We looked at a broad index, such as the Russell 3000. That volume went from a little over 100 campaigns in 2018, so not so many years ago, a little over 100. And it reached last year, which was a record year for activism in the United States, it reached 410 campaigns. So it quadrupled in a relatively short period of time. So that's the first indicator.

The second one, which is also important, is the type of companies that are being targeted has evolved. It used to be that activists would target small companies, and the reason was very simple: It's that in a small cap, let alone in a micro-cap company, the amount of capital that is required to acquire a stake that allows you to exert an influence on that company is much lower than in a large S&P 500 company.

But now what we are starting to see in the last few years that there's a growing number of large and prominent companies that appears to be in the news for being targeted by activists. We calculated, actually, the chance of being targeted by an activist for an S&P 500 company. And it tripled over this period of time. In 2018, activists were targeting 2% of the companies in that index, in the S&P 500. And that percentage rose to 6.5 in the 2024 record year. So now more than six companies of every 100 means that you are in a territory where the board of directors of a large US public company needs to add the risk of becoming a target of an activism, a campaign to its agenda, essentially.

Steve Odland: Now, this is mostly done through the proxy. Just briefly, describe for those people who may not be familiar, what's a proxy? And then a lot of these campaigns are proxy contests, so therefore, what does that contest look like?

Matteo Tonello: Yes. So the proxy contest is essentially a director election battle, which is why it's also often called the proxy fight. So in a typical proxy contest, the activists nominate their own candidates to the board and then conduct a campaign to persuade other shareholders to vote for those candidates instead of the management slate of directors.

The proxy contest, in a way, is viewed as a nuclear option in shareholder activism, and it's used only in limited amount of cases. We see 10%, or even less than 10%, in any given year of the total number of activism campaigns. And what we see is that the main reason for that is that the expenses of running a proxy contest tend to be quite high. The chances of winning remain relatively low for an activist investor. And then, the activist also has to consider the potential backlash it may expose itself to for being too hostile to a company. So that all of these reasons contribute to the fact that proxy contests are a minority of the activism and campaigns that we see out there, that we track.

Steve Odland: Yeah. And so what's the aim of these proxy contests? What do these activists want?

Matteo Tonello: Yeah, the reason why these contests continue to be used as a tool by activists is that essentially if the activist is successful, that investor gains one or more seats on the board. And by doing so, it has direct access to the decision-making process of a company. So it's the most effective way to essentially influence the strategic direction of a company in the future.

Steve Odland: Yeah, and do they always win?

Matteo Tonello: No, and I alluded to that earlier. I think that if there are wins, most likely, those are partial wins. It's very, very difficult for activist investors to win control of a board through a proxy contest. And the main reason for that is that institutional investors, as well as retail investors, tend to side with the incumbent board members. So it's just very difficult for the activists to pull it off. And that's part of the reason why, especially in the last few years, we've seen a significant growth in other types of campaigns. And we can talk a little more about those, as opposed to the typical proxy fight.

Steve Odland: So the proxy is the ballot to vote for the directors and to vote for shareholder proposals. That's one mechanism. You can, activists or shareholders, come in through the ballot, they make the proposal, and so forth. But there are other types of activist fights. How do they differ, and how do they do that?

Matteo Tonello: Yeah, so like I said earlier, only about 10%, or even fewer than 10% of the total activist campaigns that we track every year seem to be proxy contests. Most of those campaigns are less about replacing directors and more about sending a message of dissatisfaction and sort of generating public pressure on a company to change, to make some type of changes. And the way this is done is by leveraging another tool that is available under securities laws in the United States, which is the exempt solicitation.

And the exempt solicitation rules allow activists to communicate freely with other shareholders for purposes other than trying to influence a director election. The only real restriction that the rules pose on activists is that the communications should not include false or misleading statements. Other than that, they can, the activists can use the exempt solicitation quite freely.

And there are three types of exempt solicitation. We really get into how the activist campaign, other than the proxy contests, can look like, what it can look like. The first one is the "vote no" campaign. That's when an activist might ask other shareholders to signal that dissatisfaction by voting against the reelection of certain directors.

And we see cases, we have been seeing cases, where the chair of a nominating committee was targeted for failing to address some board composition issues. For example, we see cases where the chair of the compensation committee was targeted for failing to respond to a negative "say on pay" vote. So that's the first type. Those individuals are targeted in a "vote no" campaign to essentially vote against their reelection.

The second type is the vote against a management proposal, and the typical example here is the "say on pay" vote, to strike down an executive compensation package.

And the third one is the vote for a shareholder proposal, most likely proposals related to governance or even sustainability or policy issues. And they could range from splitting the CEO and board chair positions to adopt a climate change risk mitigation plan. These are precatory proposals. If they pass, the boards are not required to implement them. But if they pass with a high support level, and the board does not react to them, then the chance of that company being scrutinized, not only by activists, but also by proxy advisors, by large institutional investors of other types, that chance of being scrutinized increases.

And activists know about this and have been leveraging this knowledge by weaving these types of requests related to governance and sustainability issues into main grievances that they have related to the underperformance of the company.

Steve Odland: Yeah. Now, you mentioned that some of these proposals are precatory, meaning that they're advisory or voluntary, but some are not, some are binding. Just let's just talk about some of the key themes. You've talked about wanting to replace directors. In some cases, they're going right after CEOs, but what are the buckets? What are the key themes of where you see activism today?

Matteo Tonello: Yeah, yeah, absolutely. So the triggers for activists, the investors, usually boil down to a sense that the company could be doing better, a sense the management isn't really fully unlocking shareholder value. And typically these triggers are related to the financial underperformance or the undervaluation of a company.

There could be a situation where the stock price is significantly lagging its peers. There could be a situation where the company sits on a nonprofitable asset. And all of those situations lead to requests by the companies to make strategic changes. To divest, for example, that asset or requests of this type.

Another important trigger is the capital allocation or the operational frustration. There could be a big restructuring, for example that a company is engaged in that is going to slowly. And the activist doesn't like that. Or there could be concerns regarding overspending on some low-dividend projects, and the activist doesn't like that.

Steve Odland: Yeah, and you mentioned capital deployment and so forth. Sometimes they have, they're sitting on a lot of real estate, and activists want that to be monetized. I mean, there's a lot of different financial reasons for it. It's usually balance sheet usage or just to try to improve the profitability of a firm.

But their tactics have changed, too. They used to take their arguments directly to shareholders or directly through the proxy comments. I mean, these are turning into campaigns now. They're using what, podcasts, videos? It's getting sophisticated.

Matteo Tonello: It is getting very sophisticated. In fact, I was mentioning earlier the findings that point to our conclusion that this has really become a mainstream phenomenon and that companies need to take notice. Another important indicator, according to our research, is that activists have been adopting and developing very sophisticated communication playbooks to essentially execute these campaigns.

In the early days, they used to be acting alone or maybe in concert with a so-called wolf pack of other like-minded hedge funds. Now what we are seeing is that they've become really good at engaging other large institutional investors. And what I mentioned earlier about weaving into their complaints issues of corporate governance, issues of sustainability that resonate with public pension funds, that resonate with large asset management companies and providers of index funds, for example. and in particular.

Well, they've become really good at doing that and leveraging the exempt solicitation process that I described earlier, to reach out to a vast area of different types of institutional investors to get their support, which is essential, especially at large public companies, essential to ultimately succeed in campaigns like this.

Steve Odland: We're talking about shareholder activism. We're going to take a short break and be right back.

Welcome back to C-Suite Perspectives. I'm your host, Steve Odland, from The Conference Board, and I'm joined today by Matteo Tonello, the head of TCB Benchmarking and Analytics at The Conference Board.

So, Matteo, we were talking about all the different kind of styles of campaigns and the reasons people are attacking, but there's this real troubling trend recently of CEOs being targeted, and there appears to be gender bias in that. Tell us about those trends.

Matteo Tonello: Yes, we do have the numbers that seem to show that CEO targeting has really become a trend in shareholder activism in recent years. And according to our research, the number of campaigns that are explicitly focused on a company CEO has roughly quadrupled since 2018. In 2025 alone, we actually pulled the data at the beginning of July. So the first six months of 2025, we counted 17 campaigns where the CEO was directly being targeted. And that's a huge shift in a relatively short period of time from just a few years ago.

Why is this happening? This is also, we think, part of that communication playbook I was referring to earlier. Activists have realized, essentially, that by aiming high, as high as the CEO, they can get more exposure. They can get the attention, especially of traditional media. So that puts the company under a completely different level of pressure to take some visible actions. Obviously, the board doesn't like something like that because it can become quite public, and it can become quite personal because an individual, the top leader, is involved.

Now, of course not every campaign really starts with "fire the CEO," but it's become significantly more common now for the CEO's job to be on the line, which is something that we were not seeing just a few years ago.

Steve Odland: Yeah. And recently, as more women have become CEOs, you're seeing attacks there, which you would expect to see at roughly the proportion, same proportion as men, but it seems to be that women CEOs are getting attacked at a higher rate.

Matteo Tonello: Absolutely, and this is a key finding in the research we are releasing. And it was really eye-opening for us. And what we did was looking at two different data points. First, we took a look at activism campaigns against companies that happen to have a female CEO. And then we singled out specifically those campaigns where an activist investor is explicitly targeting a female CEO, whether by simply criticizing that female CEO or by explicitly requesting that she step down.

And we found a gender bias in both samples, even though the numbers are quite different. In the first sample, what we found is that about 7.2% of all Russell 3000 activism campaigns in the 2018 to 2025 period, 7.2% were launched at companies led by women CEOs. And this compares to an average rate of representation of female CEOs in the entire CEO population. For the Russell 3000, that is about 6% on average in the same time period.

So this may not sound like a huge difference, but it actually shows that activists are targeting female CEOs at a rate that is higher than the representation of female CEOs in the index.

Steve Odland: Now, you mentioned that CEOs can be targeted because of publicity, it grabs the headlines and so forth. But CEOs also are accountable for the operations of a company, and it can be the fastest way to effect change that is consistent with whatever is demanded by that activist, right? So they can put their person in and get their stuff implemented faster.

So sometimes it's because the CEO performance is lagging or the CEO has done something wrong, but this usually is governed by the board sufficiently. It's typically more that they want more proactive change favorable to their direction. Any other thoughts come to mind as to the reasons of why go after the CEO?

Matteo Tonello: Yeah. And to try to explain this, and especially the gender bias that we've been seeing here, we looked at academic research that has examined these factors and even beyond the world of, the realm of shareholder activism. And we looked at academic research studies that focused on the recruitment of leaders, the performance evaluation, and the succession, and there seems to be multiple factors at play here, possibly at play.

The first one could be a stereotype about leadership capabilities. There may be some type of lingering bias in business that equates effective leadership with traditionally male traits. The second stereotype that could be present here is that female directors may be viewed as more collaborative, female leaders, sorry, may be viewed more as more collaborative or less confrontational. So if they fall for this type of stereotype, activists may actually perceive female CEOs as easier to influence or intimidate, even, and therefore target those companies because they hope they'll be an easier win, quicker to concede or come to a compromise.

Then there's the so-called glass cliff phenomenon, which is another factor, and that's the idea that women are more likely to be appointed to lead companies that are already in trouble. So in a way they may be set up to fail, so to speak.

Steve Odland: Yeah, lots of different reasons out there. Some of them are hypothesized, but. OK, so if you're a company, what do you do to avoid this? I mean, there are certain steps that you can put into place to make sure you have good governance and you're taking the proper things. But what are some proactive steps? And then go into, all right, if that fails and you still get some sort of contest, then what?

Matteo Tonello: Yeah, so in the reports, we identify some suggestions for companies in terms of things to do, to avoid. There are three essentially that we talk about.

The first one is prevention, and that essentially consists of thinking, try to think like an activist, and anticipate what could make the company a target in practice? This means conducting vulnerability audits and asking some tough questions internally. Are we underperforming compared to our peers? If so, where are we underperforming? Is our strategy clear? Do we articulate it to shareholders when we communicate to shareholders? Are there important governance or sustainability vulnerabilities, like poor board practices shareholder unfriendly bylaws, lack of a climate strategy? Anything really that could single us out in the eye of a large institutional investor that cares about these issues.

So prevention is one aspect. Proactive engagement is something else that we recommend, especially with large institutional investors. And you want to make sure that that proactive engagement is ongoing, it's year-round, and that does not just happen during the times of crisis. If your large institutional investors feel heard and know that the company is responsive to their concerns, they are less likely to side with an activist in a situation where that activist is complaining that the company isn't listening.

And then third, and quite important, we've been talking about data and statistics, peer benchmarking. Keep tabs on what your peers are doing. Activists often use those peer performance and benchmarking on practices to make selections about their targets.

And then stay in line or ahead of the industry best practices. So, for example, if every other company in your peer group has, let's say, separated the CEO and board chair roles. That doesn't mean you have to do the same, but it does mean that you need to have a very clearly articulated explanation for why you're not doing the same.

Steve Odland: And if attacked, then what?

Matteo Tonello: So if a company is attacked, it's very important that it has a response plan in place. And first of all, it has to organize internally. That means it will have to either create a special committee or consider creating at least an internal task force with key competencies that are legal, finance-related. IR-related because obviously, communication's of the essence, but there should be a dedicated team. I mean, a campaign is going to be a time-consuming endeavor. And so, we need people that are dedicated to it.

Especially if the company is at its first experience with an activist investor. It should consider also engaging outside advisors that are specialized in these types of battles. Because now, at this point, there are many types of services that are dedicated to supporting companies during these types of campaigns.

The second thing is really understanding what the activist is asking, and try to understand their perspective and their goals. They're typically sophisticated investors that have a clear game plan. So understanding the game plan is critical. And in doing so, the company would need to answer the question, is that request that we are getting self-serving? Or is it valid criticism? Because the response strategy will be informed by the answer to this question.

And then also run some type of scenarios. So if we make some concessions to the activist, let's say that we give the activist one or two board seats. Are we actually going to make progress with respect to certain issues, or are we going to end up harming the company and its shareholders? This is a very important question, because there's nothing wrong with making concessions. But directors, senior executives have fiduciary responsibilities, so they need to be able to answer these questions in an informed manner. And if they do so, and if they conclude that the request of the activist is actually going to damage the company, then they should engage in a fight. They should be prepared to go to battle against the activist.

Steve Odland: But talking, and trying to work this out quietly, is always the best way. You start that way before you Go to some sort of public situation. Another thing that all companies can do to prepare yourself for activism is to join The Conference Board. Our Governance & Sustainability Center has experts on it, including Matteo and others. So it's an easy way to network with others and figure out how to prevent these things from happening and what to do when they happen. So, another thing you could do.

Matteo, your report is available on the website, at TCB.org, and you just have to scroll down to the Governance & Sustainability Center, right?

Matteo Tonello: Absolutely, yes, it's available, and we look forward to your feedback, to your thoughts.

Steve Odland: Great. Matteo Tonello, thanks for being with us today.

Matteo Tonello: Thank you so much. Thank you for having me.

Steve Odland: And thanks to all of you for listening to C-Suite Perspectives. I'm Steve Odland, and this series has been brought to you by The Conference Board.