The 2013 proxy season was in many ways unremarkable, yet in important respects it illustrates the developing nature of shareholder activism in our era of corporate governance. The issues in dispute, the voting results, and the overall trends were not significantly different from those in recent years. Nonetheless, there is an important takeaway from the 2013 season: Shareholder activism has gone from fringe to mainstream. While individual gadflies and labor union pension funds are still the most prolific sponsors of shareholder proposals,1 some elements of their agendas have begun to find support among traditional investors.
Not too long ago, large, profitable corporations were considered immune from economically-motivated activist attacks, and activism was not central to the agendas of establishment players in the corporate arena. In 2013, it became clear that even household-name companies with best-in-class corporate governance and rising share prices are liable to find themselves under siege from shareholder activists, often represented by well-regarded investment banks, law firms, public relations firms and other advisors. Even some academics praise shareholder activists’ latest exploits. Shareholder activism, in its latest incarnation, is no longer a series of isolated approaches and attacks; instead, it is an environment of constant scrutiny and appraisal requiring ongoing monitoring, awareness and engagement by public companies. Proxy statement disclosures are an important tool in shareholder engagement and have been a focal point for companies in the 2013 season. In particular, companies successfully enhanced their proxy disclosures regarding executive compensation, shareholder outreach efforts, the qualifications, expertise and diversity of their board members, and audit committee reports.2 Companies also have been successful at communicating with investors throughout the year to minimize conflict during the proxy season. Some major institutional investors have established in-house proxy departments to engage directly with corporations and make voting decisions without relying on the recommendations of proxy advisory firms.
