Alfredo Porretti:The proxy levels are as high as last year, about 33 campaigns in the US are only a small portion of what's going on. There is a lot going on in the background and notably the effect of that is that we all are very busy, but also that boards and management teams are either directly involved in dealing with activists or agitating shareholders behind the scenes. But also, don't forget a lot of these board members sit on multiple boards and a lot of members of management have friends at other companies. And so, they end up being even more focused these days because they're sensing an increased activity level behind the scenes.Alfredo Porretti:I would say that earlier in the year, there was a lot of M&A and transactional kind of asks. Now things have re-normalized and there's more focus on some degree of return of capital to shareholders and operational asks. But I think it is a bit specific to industries and depends on the circumstances and clearly as it is the case in many circumstances, ESG and governance themes tend to be coupled with value themes as companies are being targeted by activists. Alfredo Porretti:And on the same note, I think the amount of capital in the markets is still staggering. So, there's a flood of cash, and that drives the forces of activists to some extent, private equity, to look at potential companies down the road might be appetible in terms of being a purchase target. I would also add a third phenomenon, which I'm noticing, is that activists that might not have the pedigree of the usual suspects are becoming a little bit more eager to step up in terms of bigger leads and are doing more active maneuvers, notably around companies, where they can enormously benefit from the cache held by the company that they're targeting.David Freedman:We have seen a lot more of the companies above 10 billion that's where you've seen more activity. And actually, the portion of campaigns for companies with market caps below 1 billion has decreased over the past couple of years, turning to the proxy season. Alfredo, which you just picked up, we had 10 proxy fights that went all the way to a vote this year. But the difference was this time managements were winning more than they did last year. You want to talk about how that's happened?Alfredo Porretti:Sure. It is a function of the types of targets and the claims and the defenses that management put in place. I do think that if you think about it in an aggregated basis, both from a proxy fight standpoint and a settlement short of the proxy fight, the results seem to be fairly equal on both sides. I.e., an activist is able to impact a company's strategic direction by getting board seats, maybe through a settlement versus a full proxy fight that goes to a vote. The other interesting trend there is that we've seen ISS, institutional shareholder services, increasingly siding with management teams, in the last turn.David Freedman:We did see a huge uptick in the number of proxy proposals in the past year, under the environmental and social sides. I worked with a lot of companies on how to deal with that this past year, but what's interesting is it did not receive the same percentage approval. We were hearing from institutional investors that they didn't wanna support it, even though they support the environment or social issues, they thought that these proposals were so specific that it would not help the long-term value of the company. Alfredo?Alfredo Porretti:Agree with that. Ultimately, they've gotta be thinking about ESG increasingly as they dictate the strategy of the company. Getting back to proxy, fights. It's interesting how there have been a couple of campaigns that I would say are pure play ESG campaigns and notably the McDonald's and Kroger campaign run by Carl Icahn this year, which were not successful, but pushed the envelope a little bit in terms of making ESG the center and the main fulcrum of a campaign.
Hear the key takeaways from the past year’s Proxy Season, including the dynamics of contests, upticks in environment and social proposals, and settlement increases.