NEW YORK-- February 17, 2023 -- Last year, companies subjected to new activist campaigns increased by 10.6% in the U.S. and 6% globally in 2022, according to a new report released today by Diligent, the global leader in modern governance providing SaaS solutions across governance, risk, compliance, audit and ESG. The Shareholder Activism Annual Review 2023 report, produced by Insightia (a Diligent brand) shows that activism flourished in 2022 with the number of campaigns returning to pre-pandemic levels, spurred on by the introduction of the universal proxy.

The rising number of campaigns underscores the need for leaders to have a 360-view of data across their organization, strengthening their ability to identify which red flags to escalate to the board, monitor and mitigate evolving risks, and document compliance and risk management efforts in defensible, auditable detail.

“Amid heightened focus on a company’s bottom line, it is increasingly important for leaders to address and mitigate the ever-evolving risks of shareholder activism,” said Josh Black, editor-in-chief at Diligent. “Complete visibility into organizational data is the first step to building such a program and reducing vulnerability to investor, shareholder, and legal action.”

Among the report’s top findings:

The U.S. and Japan drove activity, with a focus on capital allocation, board changes, and ESG

· In the U.S., 511 companies faced activist demands, a 10.6% increase from 2021. This is in part due to the universal proxy rules, which have sent a jolt through the industry as advisers try to model how the greater choice available to investors will influence voting decisions.

· Japan proved especially attractive to activists, thanks to an increasing number of domestic investors looking to capitalize on undervalued companies. In 2022, 108 companies faced demands, almost double the 67 and 66 companies targeted throughout 2020 and 2021, respectively.

Investors’ expectations on executive compensation continue to increase

· Amid tightening markets and global interest rate rises, pay for performance compensation is becoming a regular part of investor engagements, with 114 companies facing remuneration demands globally throughout 2022, compared to 86 and 92 throughout 2020 and 2021, respectively.

· 1,397 Russell 3000 CEOs received pay increases of between 1-250% from FY2020 and FY2021, with average CEO pay exceeding $22.5 million. Pay revolts are also on the rise, with average support for S&P 500 advisory “say on pay” plans reaching an eight-year low of 87.5% in 2022.

ESG activism is facing a crisis of confidence

· Only 11.5% of environmental demands were at least partially successful in 2022, compared to 25.8% a year prior.

· With green stocks underperforming and oil and gas prices soaring, ESG campaigns that failed to make a compelling link between a company’s financial performance and ESG credentials were doomed to fail.

The Shareholder Activism Annual Review, produced in association with Olshan Frome Wolosky, Morrow Sodali, and Alliance Advisors, is Insightia’s flagship report for data on shareholder engagement, corporate governance, and compensation.