Andrew Freedman Publishes Article in Harvard Law School Forum on Corporate Governance on Activism in 2023 and a Preview of 2024

Olshan Co-Managing Partner and Chair of the firm’s Shareholder Activism Practice Andrew Freedman authored an article for Harvard Law School Forum on Corporate Governance entitled “Summary of Activism in 2023 and a Preview of Activism in 2024.” Despite the inclination of many activists to tread cautiously in 2023 during the first full year under the universal proxy card rules coupled with the SEC’s announced final rules governing its proposed modernization of the Schedule 13D reporting system, Andy writes that “shareholder activists proved to be highly impactful in 2023 in terms of their ability to influence boards, obtaining a record number of board seats since 2018.” Andy notes that activists also enjoyed a busy year on the international stage in 2023: “With sharp spikes in the number of companies subject to activist campaigns in certain foreign jurisdictions, including Canada and Asia, U.S. activism accounted for less than 50% of global activity for the first time since 2020 according to Barclays.” He also dispels the assumption that the universal proxy card would reduce the costs of running a proxy contest and would inspire a torrent of “gadfly activists”: “Instead, what we have actually seen under UPC is a greater appetite by boards and their advisers to reach cooperation agreements in the face of activists seeking to replace the most vulnerable, ‘weakest link’ incumbents with highly qualified, specialized and diverse nominees.” Moreover, Andy explains that activists were pleased with the SEC’s decision not to completely overhaul the beneficial ownership reporting regime. "At the end of the day,” he writes, “the new rules were less transformative and more balanced than initially proposed. …While the SEC’s guidance provides helpful insight, we believe that most seasoned activists had long ago incorporated the salient principles of group formation and swap-related beneficial ownership underpinning this guidance in the way they conduct their investment activities.” Andy observes that the adoption of onerous amendments to companies’ advance notice nomination bylaw provisions presented issues for activists in 2023, but he also notes that “activists scored a monumental victory when the Delaware Chancery Court in Kellner v. AIM ImmunoTech, Inc. invalidated four of six amended ANBs, including the use of a troubling ‘stockholder associated persons’ provision, for being ‘overbroad, unworkable, and ripe for subjective interpretation by the Board.’” Andy concludes that we can expect similar lawsuits in the future and that “in 2024 we would not be surprised to see shareholder activists be more proactive in shining a light on offensive ANBs right off the bat by incorporating business proposals into their nomination letters that seek to clean up or roll back these provisions as part of the annual meeting agenda.”