Shareholder Activism Is Changing Fast and Companies Need to Keep Up

As companies gear up for the 2025 proxy season, shareholder activism remains a central concern in the boardroom. Shifting regulatory guidance, evolving engagement practices, and heightened market volatility have created an environment where companies must be constantly prepared to defend their strategies and governance practices.

At a virtual roundtable on March 11, 2025, a distinguished group of experts came together to discuss how issuers can best prepare for the coming season. Moderated by Keith E. Gottfried, CEO of Gottfried Shareholder Advisory, the panel featured Elizabeth Bieber, Partner at Freshfields; Stephen L. Brown, Senior Advisor and Managing Director of the Board Leadership Center at KPMG LLP; Renee Soto, Founding Partner at Reevemark, LLC; and Michael Verrechia, Senior Managing Director of M&A and Activism Advisory at Sodali & Co.

Fifty days into the Trump administration’s second term, the panelists agreed that the political and regulatory environment has already begun to reshape the landscape for shareholder activism. While many predicted that Trump 2.0 would usher in a boom in M&A activity and activist-driven deal-making, the panelists noted it is still too early to know whether those forecasts will come true. Verrechia remarked that although there has been a slight uptick in M&A transactions, it falls short of expectations. “The real test will be in the fall and into 2026,” he said. Stephen Brown echoed this caution, describing a mood of hesitation among directors who were optimistic at the start of the year but are now taking a wait-and-see approach in light of market volatility and looming trade conflicts. “Directors are sitting on their hands,” Brown observed. “They’ve been thrown for a loop in the past fifty days.”

Beyond economic uncertainty, the Trump administration has ushered in significant regulatory changes, particularly with new SEC guidance that has disrupted traditional shareholder engagement. Under the new rules, historically passive institutional investors are now required to file long-form Schedule 13D disclosures in certain circumstances, rather than the less detailed Schedule 13G. According to Bieber, the impact was immediate. “Within days of the guidance coming out, major institutional investors paused or canceled their engagement programs entirely,” she said. “What had been open dialogues are now one-sided conversations, where companies find themselves trying to read body language rather than receiving meaningful feedback.”

This change has created a chilling effect on corporate-shareholder engagement. Bieber described how meetings that once provided valuable investor insights have devolved into sessions where investors remain silent or issue disclaimers before the conversation begins. “Companies are now the ones doing the talking, but with little sense of whether their messages are resonating,” she said.

As a result, the panelists stressed that issuers must adapt their engagement strategies and find alternative ways to connect with shareholders. Verrechia emphasized the need for companies to take control of their messaging. “These meetings are no longer about hearing what investors think,” he explained. “They’re about telling your story, highlighting your strategy, and reinforcing your value proposition.” He also urged companies to prioritize outreach to retail investors, a segment often overlooked in traditional engagement strategies but increasingly influential in close proxy contests.

Activism preparedness, the panelists agreed, should no longer be viewed as a seasonal task tied to the proxy calendar. “Just because the advance notice window has closed doesn’t mean you’re in the clear,” Verrechia warned. “Activists can, and do, make moves year-round.” Soto noted that many activists prefer to watch from the sidelines until an opportunity arises. “Just because you don’t hear from them doesn’t mean they aren’t watching,” she said. Brown recommended that boards conduct regular “red team” exercises, simulating activist challenges in order to anticipate potential vulnerabilities. “Boards need to think like activists—at least periodically,” Brown said. “It’s better to spot a weakness yourself than have someone else point it out.”

When activism does surface, companies are increasingly opting for settlements over protracted proxy fights. Soto described this shift as pragmatic. “Settlements avoid the reputational damage and expense of a drawn-out fight,” she said. Brown added that for CEOs, even a victory at the ballot box can be Pyrrhic. “Winning the fight doesn’t always mean you win in the long term,” he observed. “A CEO can emerge victorious from a proxy contest only to be quietly replaced later.”

Bieber argued that many activists aren’t interested in board seats at all but instead use proxy contests as leverage. “Why go through the hassle of board service, with all the fiduciary duties and restrictions, when you can negotiate changes and declare victory?” she said. She pointed out that board observer roles or settlements where activists take credit for previously planned governance changes are becoming increasingly common.

The panel also discussed how activists are turning to litigation tactics, such as Section 220 demands, to uncover potential weaknesses. Bieber emphasized the need for companies to be prepared for these requests, which can be used to generate negative publicity or fuel activist narratives. Additionally, the universal proxy card, now in its third full proxy season, has made it easier for shareholders to split votes between company and activist nominees. Verrechia, however, downplayed its impact, describing it as “just another voting tool” rather than a game-changer.

Looking ahead, the panelists shared their key recommendations for issuers. Soto underscored the importance of controlling the narrative before an activist does it for you. Bieber warned companies to be mindful of every public statement they make, cautioning that “missteps will be used against you.” Brown called for greater coordination among legal, investor relations, and communications teams to ensure a unified response. Verrechia summed up the panel’s consensus by advising companies not to wait until an activist appears. “The best defense is a proactive, year-round engagement strategy,” he said.

Gottfried closed the discussion with a stark reminder: “At some point, every company will be targeted. The question is whether you’ll be prepared when it happens.”

As shareholder activism continues to evolve, companies that remain vigilant, proactive, and engaged with their stakeholders will be best positioned to navigate the challenges of the 2025 proxy season.