Investor activism hit a record high in 2023 as companies faced new pressures over executive pay, climate change and racial justice while seeking to respond to these forces.

There were 1,162 activism campaigns in 2023, up from 1,100 a year earlier and 370 campaigns in 2014, according to the latest S&P Global Market Intelligence data. The number of campaigns, which include shareholder proposals, proxy fights and organized requests for board representation, has skyrocketed as activists have attempted to align corporate views with their own.

Companies are responding in part through lawsuits aimed at blocking new proposals and restricting regulatory involvement. Yet a significant number of activist proposals may be adopted in some form, and activism is likely to continue to grow and evolve as shareholders attempt to exert greater influence over companies' policies and operations.

"We certainly do not see it slowing down in 2024 or even 2025 due to a growing track record of success and support from investors," said John Karageorge, a managing director with Market Intelligence. "If we see interest rates fall this year, we could see a pickup in the M&A markets, and both of these factors could actually incentivize higher levels of activism."

Companies pushing back

Corporations are responding to the rise in activism by challenging the rationality of some of these campaigns in court and with the US SEC.

In January, Exxon Mobil Corp., doing business as ExxonMobil, sued activist investors seeking a shareholder vote on the oil major's climate policies. While the shareholders dropped the proposal, ExxonMobil is continuing its legal fight, asking the court to block investors from presenting future climate proposals.

The company is seeking clarity on "a process that has become ripe for abuse" and reiterated that activists with "minimal or even no shares should not be permitted to resubmit proposals that do not grow long-term shareholder value," an ExxonMobil spokesperson said in a written statement to Market Intelligence.

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"The company wants to send a message that future proposals sought by shareholders may be treated similarly," said Carol Nolan Drake, a senior policy manager at the International Corporate Governance Network. "That would be very expensive for a shareholder without the reserves of a company like [ExxonMobil]. This could have a chilling effect on shareholders seeking to add such proposals to company ballots in the future, which is their right."

In 2023, the National Center for Public Policy Research, a conservative think tank, filed a lawsuit against the SEC, arguing that a shareholder resolution that is anti-environmental, social and governance should not have been excluded from the proxy statement of retailer The Kroger Co. The National Association of Manufacturers intervened in the case, arguing that the SEC should not be compelling companies to include in their proxy ballots social and political issues unrelated to a company's business.

These efforts to undercut shareholder activism are nothing new, said John Chevedden, a California-based shareholder activist who has been launching shareholder proxy measures and resolutions for decades.

In an interview, Chevedden said he has seen a variety of company tactics — including leveraging technicalities and other measures — used to resist shareholder activism.

Since 2014, Chevedden has launched 582 activist campaigns, the most of any individual or group, Market Intelligence data shows. By comparison, the California Public Employees' Retirement System, which manages the pensions of California's 1.5 million public employees and has become one of the more prolific activist groups, has launched just 98 campaigns since 2014, the data shows.

Chevedden typically focuses his efforts on changes in corporate governance, such as how often directors are elected and how much impact shareholders have on executive pay. In his most recent effort launched in late February, Chevedden filed a proposal that would set certain pay packages for senior managers at HP Inc. to be subject to shareholder approval.

Activists' approaches are evolving

The methods of activism have also significantly evolved in recent years, said Karageorge with Market Intelligence.

"The days of corporate raiders making a ton of noise are over," Karageorge said. "Today, more activist campaigns work 'behind the scenes' with the company to effect change."

Activists' objectives have also morphed over the past decade. While stock buybacks and targeting a company's sale were more popular campaign goals a decade ago — thanks to low interest rates and a lively M&A market — activists' current focus has shifted to include a wider breadth of concerns.

"You do see activists who are targeting companies that are underperforming, in their estimation, and trying to get those companies sold," said Patrick Gadson, partner at Vinson & Elkins LLP with principal practice areas in private equity, M&A and shareholder activism. "But it's a less frequent ask. Instead, we're seeing greater focus on the traditional fundamentals of corporate operations, such as selling, general and administrative expenses [SG&A] as a proportion of revenue and governance."

Those behind the scenes of shareholder efforts today are trying to redefine investor activism as investor advocacy, said Andrew Behar, CEO of As You Sow, a nonprofit foundation aimed at pushing corporate responsibility on climate and social issues.

"We're looking to improve the company, make it more profitable, but also take care of all stakeholders," Behar said.

As You Sow has been the third most prolific activist or advocacy group, launching 178 campaigns over the past 10 years, according to Market Intelligence data.

In January, the foundation launched a proposal pushing Tyson Foods Inc. to increase packaging recycling and reusable packaging and has pushed efforts to get companies to assess the risk of investments in high-carbon industries and to reduce greenhouse gas emissions.

Successful activist, successful company?

Even with corporate pushback, companies are generally growing more amenable to change, said Behar with As You Sow.

"We believe that markets have already shifted toward sustainability, toward justice," Behar said. "The most profitable companies are the ones that are adapting to this new system."

Even if companies do not publicly credit activist investors, those shareholders can still be successful in getting companies to consider their concerns.

"What we've found is that a lot more companies are willing to be aggressive about the points of contention and vulnerabilities that the activist points out and to remedy those issues; therefore removing the activist's desire for additional change because the companies are embracing that change — whether or not they give the activist credit for it," said Gadson at Vinson & Elkins LLP.