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Shareholder activism is surging in 2025. Nearly 600 U.S. companies faced demands in 2024 — up 16% from 2022 — and the pressure is only growing. In Q1 2025, activist campaigns targeting U.S. companies jumped 46%. The boardroom is no longer a quiet place. How can directors ready themselves for what will be a turbulent year in the boardroom?
Key takeaways:
- With activism sharply increasing in 2025, corporate boards must proactively engage with shareholders, anticipate potential activist concerns (e.g., profitability, restructuring, cyber, digital, ESG, DEI, etc.), and develop robust strategies to address them
- Companies will have to broaden their stakeholder engagement strategies to include emerging activist investors and understand their unique perspective and demands
- Boards should assess their composition and consider proactive refreshment strategies to preempt activist interventions
- Management teams should be prepared to demonstrate clear value creation strategies and operational excellence to satisfy shareholder expectations
- Companies will have to link executive compensation packages to performance metrics and shareholder interests
What is driving this upward spike?
Let’s look at a few critical trends that are driving this sharp increase in activism.
- Surge in first-time activist investors. The activist landscape is witnessing an influx of new participants. In Q1 2025, 11 first-time activist campaigns were launched.
- Increased success in securing board seats. Activists are achieving greater success in influencing corporate governance. In the first quarter of 2025, activists secured 51 board seats, marking a 34% increase from the previous year
- Activists target CEO removals. Since 2023, CEOs have been departing at a faster rate due to activism, alongside board chairs, and other members of senior leadership
- Shift to financial focus. While ESG issues remain salient, Boards have pivoted towards both short-term and long-term financial performance and operational efficiency, and away from the ESG issues that have dominated conversations for the past 5 years.
- Heightened scrutiny of executive compensation. Activist investors are increasingly targeting executive pay structures. For instance, a coalition of pension funds managing approximately $950 billion in assets has called for Elon Musk to commit at least 40 hours per week to Tesla, linking executive compensation to active leadership.
- Escalation of anti-ESG and anti-DEI proposals. The number of anti-ESG and anti-DEI proposals has surged, with filings increasing from 23 in 2021 to 112 in 2024
- Reevaluation of corporate incorporation jurisdiction. States like Texas and Nevada are challenging Delaware’s dominance as the preferred state for corporate incorporation by enacting laws that favor management and reduce shareholder litigation. In 2025, 12 companies have planned to exit Delaware, with 10 heading to Nevada.
- Consumer-driven. Consumer activism is influencing corporate policies, particularly around DEI initiatives. Companies like Walmart and Target have faced boycotts and reputational risks due to their changes in DEI policies.
Major implications for U.S. multinationals
- Increased CEO turnover due to activist pressure and loss of market value. In 2023, U.S. companies experienced 1,914 CEO departures, which represents a 55% increase from 2022 and the highest annual total since tracking began in 2002. The first quarter of 2025 saw 646 CEO exits, indicating a continued upward trend. A 2014 PwC study estimated that such turnover costs an estimated $112 billion in lost market value annually.
- Focus on operational and strategic reform will be diverted. With an emphasis on short-term return, management teams have expressed concerns that activism will divert long-term investments and capital.
- Reputational risks are increasingly hard to manage. With activists raising a myriad of business risks and concerns, many companies have a hard time managing their reputation on core issues related to company values, DEI, climate, energy, employee wellness, and geopolitics.
- Deconglomeration may challenge long-term resilience. As with GE, Honeywell is experiencing a disaggregation of its assets. For instance, at Honeywell, under pressure from Elliot Investment Management, agreed to restructure into three independent public firms, which showcases the importance of preemptive assessments
- Loss of control. As a result of activism over the past 15 years, ~30% of companies were sold or taken private through activist investor settlements
Actions boards can take:
- Conduct comprehensive vulnerability assessments. These will help identify potential areas of weakness that activists might address explicitly. This includes analyzing financial performance, governance structures, and strategic initiatives.
- Enhance shareholder engagement. Proactive communication with shareholders can preempt activist campaigns. Regular dialogues, transparent disclosures, and responsiveness to investor concerns build trust and may deter activism
- Enhance transparency and disclosure practices. Even in light of anti-ESG and anti-DEI demands, transparent reporting on financial performance, strategic goals, and risk management builds investor confidence. Regular and clear disclosures can preempt activist narratives and demonstrate the board’s commitment to accountability
- Prepare for potential settlements. Given the rise in settlements between companies and activists, boards should prepare to negotiate agreements that serve long-term interests while addressing shareholder concerns.
- Update governance policies and bylaws. Adapt to universal proxy rules and clarify procedures for shareholder proposals
- Reevaluate executive compensation structures. Executives’ pay packages are under enhanced scrutiny. Boards should ensure compensation aligns with performance and shareholder value creation
- Develop crisis management protocols. Boards should establish protocols to swiftly respond to activist campaigns, including communication strategies and decision-making frameworks. Preparedness can mitigate reputational risks and ensure the company maintains control over its narrative during activist engagements
Questions for the boardroom:
- How many activist investors have engaged with our company in the past 24 months, either formally (13D filings) or informally?
- How do the key themes emerging from shareholder proposals and activist campaigns relate to our core business? How vulnerable are we to these themes?
- What are areas of strategy, performance, or governance that could be perceived as weak or underperforming by activist investors?
- Have we conducted a vulnerability assessment to identify how activists may critique our capital allocation, ESG strategy, DEI program, or business transformation?
- How do we regularly engage with our top 25 shareholders, and how can we better focus those conversations on long-term value creation and risk mitigation?
- How do we distinguish between constructive engagement and activist pressure? Do we have a framework for escalation and resolution?
- How current is our board skills matrix to evolving activist expectations in governance, digital transformation, sustainability, and capital markets expertise?
Additional Telesto resources:
- Board series: The CEO confidence gap – How boards can step up in a context of uncertainty
- Board series: Tariff Engineering – Boards face new risks as multinationals reduce tariff exposure
- Atlas, equips your organization’s corporate directors and leaders with the insights and knowledge necessary to stay up to date, mitigate risks, and seize business opportunities associated with sustainability, climate, and ESG
- Prism, our ESG benchmarking tool, helps your organization to rapidly strengthen its sustainability, climate, and ESG performance and disclosures through in-depth benchmarking of industry peers and identification of gaps and areas of distinction
- Recently released by Telesto Strategy’s CEO & Founder, Alex Kruzel, The Courage to Continue: Stay the Course on Sustainability to Secure our Future, explores the connection between corporate priorities and President Trump’s national security agenda
