Overview

Insightia has released its latest statistical analysis of global trends in shareholder activism for Q1 2023. The report includes insights into activist trends in the US, Canada, Europe, Asia and Australia.

Below is a short overview of the some of the overall trends identified in the report, as well as some key statistics around the level and focus of activist activity in the US and Australia over the period.

Global trends

Levels of activity are 6% up on last year

• Insightia found that the level of activist activity globally has increased compared with the same period last year, with the number of companies publicly subjected to activist demands increasing from 386 in Q1 2022 to 409 in Q1 2023.
• For context, this puts the level of activity at pre-pandemic levels (387 companies were targeted in Q1 2019).

The increase hasn't flowed through to Australia?

• Looking at the level of activist activity by country, the report found that US-based companies faced the highest level of activist demands over the first quarter of 2022 with 240 companies targeted (up from 233 in the same period last year), followed the Republic of Korea (58 companies targeted, up from 36 for the same period last year) and Japan (24 companies targeted, up from 20 companies for the same period last year).
• In contrast, in Australia, the number of companies targeted was slightly down on last year – 11 companies targeted in Q1 2023 vs 18 in Q1 2022.

Most targeted sectors globally

• Globally, the most targeted sectors were: industrials (65 companies) and financial services (also 65 companies – up 33% on the same period last year) followed by healthcare (56 companies).
• In contrast, communication services (8 companies) and funds (9 companies) were the least targeted sectors.
• Large cap companies (>$108) were the most likely to be targeted by activists. At the other end of the spectrum, nano cap companies were overall, the least likely to be targeted.

'Governance' demands still the most common, sharp uptick is 'Social' demands

• The most common activist demands overall were governance related (185). The next most common category of activist demand was the appointment of personnel (110).
• The volume of 'environmental' demands was down on last year: 60 in Q 1 2023 vs 68 in Q1 2022.
• There was a spike in the volume of 'Social' demands: 69 in Q1 2022 vs 87 in Q1 2023)

US trends

According to Insightia's analysis, the focus of activist activity at US companies is more or less consistent with the global trends identified above.

Activity is up on last year

• The number of US-based companies subjected to activist demands increased from 223 companies targeted in Q1 2022 to 240 in Q1 2023.
• For context, this is highest level of first quarter activity recorded since 2018 (when 263 companies were targeted in the same period).

Demands on US companies are consistent with global trends

• The most common form of activist demands levelled at US-based companies in Q1 2023 were governance related. Of these governance-related demands, the largest category (47) called for a shift/amendment to company policy, followed by 'board independence (42).
• Q1 2023 saw a slight uptick in the number of companies facing 'environmental' demands: 33 companies in Q1 2022 vs 36 companies in Q1 2023. The vast majority of these demands relate to climate change and greenhouse gas emissions (31 companies facing this category of demand).
• Q1 2023 also saw a steep increase in the number of US companies being targeted with a wide range of 'Social' demands: 51 companies in Q1 2022 vs 70 companies in Q1 2023. The largest subcategory of these demands relate to diversity/equality (35 companies facing this form of demand) or relate to companies' 'political activity' (26 companies facing this form of demand).

Most targeted sectors

• In the US, the most targeted sectors were the healthcare (29 companies) and industrials sectors (38 companies).
• The least targeted sector was communication services.

Board seats

• Activists secured 50 board seats in Q1 2023, up from 45 in Q1 2022.
• Of the 50 secured by activists, 47 were secured through settlements (as opposed to contested votes at meetings).

Australia

As flagged, according to Insightia's report, the overall uptick in the level of shareholder activist activity is not evident in Australia where fewer companies were targeted (18 companies targeted in Q1 2022 vs 11 companies in 2023).

Activist demands

The most common form of activist demands levelled at Australia-based companies in Q1 2023 were 'Environmental' in nature. Interestingly, the report highlights that where last year 100% of demands in this category were climate change/GHG emissions related, this year, the largest category of 'Environmental' demand is 'waste and pollution'.

Board seats

Activists secured no board seats in Q1 2023 (down from four in Q1 2022). This is unusual – according to the report, the number of seats secured by activists in the Q1 2020 – 2022 periods ranged from two to six.

Most commonly targeted sectors

• The most commonly targeted sectors in Australia were: financial services and basic materials.
• Large cap companies (>$108) were the most likely to be targeted, followed by nanocap companies.
• Large cap companies (>$108) were the most likely to be targeted, followed by nanocap companies.

[Source: Insightia report: Shareholder Activism in Q1 2023]

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