Navigating the 2025 Proxy Season: Strategic Insights for Boards and Executives  

The 2025 proxy season is unfolding in an increasingly polarized environment, shaped by shifting U.S. policies and intensifying scrutiny on environmental, social, and governance (ESG) issues. As shareholder activism surges to new highs, boards and executives must prepare to navigate a complex and often contradictory landscape of investor demands.

The Evolving Shareholder Activism Landscape

2024 set records for shareholder activism, and early indicators suggest 2025 will be no different. Activists are increasingly targeting companies on both sides of the ESG and DEI debate, forcing executives to balance competing pressures.

According to the Conference Board, an analysis of shareholder proposals filed at Russell 3000 companies underscores these trends:

• Anti-ESG Proposals: Increased more than fourfold in 2024, with a further uptick expected this year.
• Anti-DEI Proposals: Surged in 2024, reflecting heightened political and legal scrutiny.
• Governance Proposals: Investor focus is shifting to governance topics such as executive compensation and director elections.
• Shareholder Activism Campaigns: The number of campaigns doubled in 2024, though investor support for these campaigns has dropped.

These figures highlight the growing complexity of shareholder engagement, requiring companies to refine their governance strategies and investor communications proactively.

Proactive Defense: How Companies Can Prepare

With heightened scrutiny and an increasingly active shareholder base, companies must take a proactive approach to governance, communication, and activism defense. 

1. Assess and Address Vulnerabilities Regularly

Companies should continuously evaluate potential risk areas and demonstrate a commitment to ongoing improvement. As Ted White, Managing Director at Legion Partners Asset Management, puts it, “We as shareholders ought to be a bit critical and skeptical when companies are only making changes when they're under pressure. Can you trust that the culture has actually changed?”

To stay ahead of activism, companies should:

• Conduct frequent governance audits to identify weak points.
• Implement necessary reforms before activists force the issue.
• Maintain transparency in disclosures to reinforce trust and credibility.

2. Engage Shareholders Before Activists Do

Engagement shouldn’t start when an activist investor appears—it should be an ongoing process. Companies that build relationships with shareholders early can avoid expensive and distracting proxy fights.

Amanda Shpiner, Managing Director at Gasthalter & Co., emphasizes, “If an activist is at your doorstep, it's too late. Some of the best work happens behind the scenes.”

Best practices for proactive engagement include:

• Regular meetings with institutional investors to understand their expectations.
• Clear articulation of the company’s long-term vision and strategic initiatives.
• A commitment to open dialogue on ESG and governance matters.

3. Maintain a Balanced and Strategic Approach to Activism

Overly aggressive defenses against activist investors can backfire, reinforcing perceptions of governance weaknesses. Companies should instead focus on constructive dialogue and strategic responses.

Marian Macindoe, Head of ESG Stewardship at Parnassus Investments, advises, “You're supposed to be partners and collaborating together to improve value for the company rather than just going in to destroy.”

Looking Ahead: Strengthening Governance in 2025

The best activism defense is strong governance. Companies should:

• Ensure their board composition aligns with investor expectations.
• Strengthen executive compensation and risk management frameworks.
• Enhance proxy disclosures to clearly communicate governance policies and leadership strategies.

The 2025 proxy season presents both challenges and opportunities for companies to reinforce their commitment to good governance while navigating an evolving shareholder landscape. By taking a proactive, transparent, and strategic approach, boards and executives can effectively manage activist pressures and maintain investor confidence.

If we can be helpful as you consider how these insights will affect your business, please don’t hesitate to reach out to our team.

Contact us:

Jacqueline Rhoades, Partner, Third Economy
Jacqueline.rhoades@thirdeconomy.com

Disclaimer: The information provided does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available are for general informational purposes only.