In the course of our practice representing activist investors, we have our fair share of disagreements with activism defense advisors. However, there is at least one thing we agree on wholeheartedly \u2013 there is no more \u201coff season\u201d for shareholder activism. In recent years, shareholder activists have increasingly pursued private engagements and public campaigns outside of the traditional \u201cproxy season\u201d, and proved that shareholders do not need an impending director election contest to reach positive outcomes. In this article, we discuss why activists launch off-cycle engagements and campaigns, the legal and practical tools that enable them to do so, a number of notable situations, and what activists and companies can take away from these developments.<\/p>\n
Proxy Season vs. Off-Cycle<\/em><\/strong><\/p>\n What we think of as \u201cproxy season\u201d runs from late November, a couple of months before public company nomination windows typically start to open, to June, after annual meetings are held.\u00a0 That period is driven by the reporting calendar of December 31 fiscal year end companies and prevalent terms of advance notice bylaws, which set out the timeframe and procedures shareholders need to follow to formally nominate director candidates for election at an annual meeting of shareholders, in accordance with applicable law and the company\u2019s governing documents. Advance notice bylaws usually provide for a nomination window, a period during which shareholders are eligible to submit director nominations and business proposals, that is typically 90 to 120 days before the anniversary date of the previous year\u2019s annual meeting. Traditionally, much of shareholder activism has revolved around that period, and the related annual meeting of shareholders. A shareholder\u2019s ability to nominate director candidates, solicit votes in favor of those candidates, and ultimately take the vote to the annual meeting, historically has been viewed as shareholder activists\u2019 primary route to effect change at a company, whether based on the outcome of a vote on the activist\u2019s director candidates, or a settlement agreed to by the company due to its concern about the potential result of the vote.<\/p>\n The annual meeting cycle continues to be viewed as the traditional and perhaps most suitable time to run an activist campaign. The annual meeting process provides shareholders with the opportunity to change the composition of the board in a definitive and near-term timeframe (to a limited extent for classified boards), and proxy advisors and institutional investors generally view it as the more appropriate time for shareholders to act.\u00a0 However, it should go without saying that important developments at public companies happen year-round, and waiting for the next annual meeting timeframe may result in the company\u2019s value deteriorating further or lost opportunities, requiring shareholders to consider alternative strategies to effectuate change in the near term.<\/p>\n Many off-cycle campaigns are driven by a feeling of urgency, a conviction that meaningful change is needed on a faster timeline than a traditional annual meeting campaign allows, in order to preserve or enhance value at the company.\u00a0 The company may announce a value-destructive transaction or an ill-advised strategic transition, double-down on its leadership in spite of prolonged underperformance, botch a management transition, or refuse to consider a strong offer that would enable shareholders to realize value.\u00a0 These actions can be enormously impactful and time-sensitive, and say a lot about a board\u2019s willingness to protect shareholder interests and hold management accountable, making it unlikely that these situations will be resolved absent strong affirmative action by shareholders to spur change.\u00a0 Several factors involving the company\u2019s engagement practices and practical considerations for the activist shareholder also come into play.\u00a0 A company may run a \u201cbait-and-switch\u201d engagement (by seemingly engaging constructively with the shareholder through the nomination window and then stiff-arming the shareholder after the nomination deadline passes), or the shareholder may not have built its full investment position or identified strong director candidates until after the nomination deadline.<\/p>\n Regardless of what brought a shareholder activist to a situation, with the legal and practical tools available to them, sophisticated players understand that a missed nomination deadline or a recently held annual meeting does not mean that shareholders have to just sit tight and wait until next year. \u00a0As we explore in more detail below, depending on the company\u2019s governing documents and applicable law, there may be opportunities to change the composition of the board or otherwise take action outside of an annual meeting by way of a special meeting or consent solicitation process. \u00a0Where those pathways are not available, shareholders can pursue other engagement and pressure tactics, which have become more effective in large part due to our more connected digital environment and accessible strategies that activists can use to reach key stakeholders.<\/p>\n Legal Pathways Outside of Annual Meeting Process <\/em><\/strong><\/p>\n It is well understood that shareholders have a fundamental right to vote in the election of directors, which typically takes place in the spring when companies hold their annual meetings. Courts have repeatedly recognized that this fundamental right to vote includes the right to nominate an opposing slate of directors. To that end, most companies include advance notice provisions in their bylaws governing the submission of nominations and proposals by shareholders at an annual meeting, including disclosure requirements and a window to submit the notice to the company (typically a one-month period of 90 to 120 days prior to the anniversary date of the prior year\u2019s annual meeting). Shareholders that satisfy the advance notice provisions have the ability to run an opposing slate of director candidates to replace the company\u2019s candidates at the next annual meeting by filing proxy materials and soliciting shareholder votes. This annual meeting nomination process has historically been used and preferred by activists as it presents a more clear-cut pathway to changing the composition of the board in the near-term, and places significant pressure on a board that faces a potentially unfavorable voting result.<\/p>\n Outside of the annual meeting process, the rights of shareholders to effectuate board change are more limited, and depend entirely on the provisions of the company\u2019s governing documents and applicable state law, particularly whether shareholders have the right to (i)\u00a0act by written consent in lieu of a meeting of shareholders, or (ii) call and take action at a special meeting of shareholders. When one or both of those pathways are available, shareholders\u2019 ability to refresh the board turns on whether they have the right to remove directors without cause, fill board vacancies, set the size of the board, and\/or amend the bylaws to grant shareholders one or more of these rights.\u00a0 If the company\u2019s governing documents do so provide, a shareholder could then seek to utilize a \u201cremove and replace\u201d strategy, where it seeks to remove incumbent directors without cause and fill the resulting vacancies with its own candidates, and\/or an \u201cexpand and fill\u201d strategy, where the shareholder seeks to increase the size of the board and fill the resulting vacancies with its own candidates, whether pursuant to a special meeting or consent solicitation process.\u00a0 Although board change is typically critical to addressing immediate shareholder concerns and setting the company on a better course, these pathways also enable shareholders to submit other business and\/or governance proposals in connection with a special meeting or consent solicitation that further their ultimate objectives.<\/p>\n Even in situations where these pathways are technically available, some companies have made it extremely difficult, if not impracticable, for shareholders to use them to effectuate change.\u00a0 A company\u2019s governing documents may include procedural hurdles and other restrictive provisions limiting the rights of shareholders to validly call a special meeting or act by written consent, such as (i) requiring high ownership thresholds and\/or holding requirements to call a special meeting, (ii) requiring supermajority voting thresholds to approve certain proposals (such as amendments to bylaws), (iii) limiting the timeframe in which a shareholder can call a special meeting or act by written consent (also known as \u201ccooling-off periods\u201d, and typically tied to when the most recent annual meeting was held), (iv) prohibiting shareholders from presenting certain proposals and\/or restricting certain matters that are \u201csubstantially similar\u201d to matters presented at a recent shareholder meeting or that were voted upon within a specified period of time (i.e., within the previous 90, 120 or 180 days), which typically cover the removal and replacement of directors, (v) requiring extensive disclosures, documentation and update requirements for shareholders to present nominations or other proposals at a special meeting or in connection with a consent solicitation, and (vi) granting the board various procedural powers to set the special meeting and record dates, and verify the executed written consents, allowing the board to control and delay the timing of a special meeting and\/or consent solicitation process. While special meeting and consent solicitations offer a meaningful alternative to change the board in between annual meetings, these pathways are not always available or practicable for shareholders.<\/p>\n Off-Cycle Engagement Tactics and Strategies <\/em><\/strong><\/p>\n In addition to campaigns to effectuate change at a special meeting or through action by written consent, which often are utilized to address urgent, event-driven situations, shareholder activists are increasingly exerting pressure on companies and engaging key stakeholders without an impending shareholder vote. \u00a0We are seeing a rise in these off-cycle engagements for a number of reasons.\u00a0 Most importantly, there typically is a strong desire of both activists and companies to reach a resolution before there is an election contest, and social media and other tools allow shareholders to employ more sophisticated and effective engagement strategies to apply pressure and communicate with key stakeholders other than through a traditional proxy solicitation.<\/p>\n Absent extenuating circumstances, reaching a negotiated resolution remains the preferred outcome for both activists and companies alike, with many more situations resolved via some form of settlement rather than through a contested shareholder vote. \u00a0There is generally a great deal of flexibility on what a negotiated resolution can entail and how it can be effectuated. It may involve a formal cooperation or settlement agreement with binding legal obligations for both parties, or an announcement of board, governance, strategic and\/or other business changes without a formal agreement.\u00a0 The activist and the company can work together on the timing and messaging of the resolution, so no matter the form the resolution takes, they can present it to stakeholders as a win for both sides.\u00a0 With the goal of a settlement in mind, we see activists approach boards and management teams well before the nomination window opens for next annual meeting to present their detailed views and analyses on the value-creation opportunities they see and changes they believe are required, and pitch the company on the benefits of constructive engagement rather than a potential proxy fight. \u00a0Indeed, earlier engagements of this nature allow both parties to focus on reaching a mutually agreeable resolution and time to iterate on the right form as they work to identify the best available new directors, without the pressure of an impending nomination deadline and the constant communications and pressure of a proxy campaign.\u00a0 To that end, we have seen, and expect to continue to see, more informal and formal settlements occurring outside of the typical \u201cproxy season\u201d and even before the activist surfaces publicly or is forced to submit a formal nomination of director candidates.<\/p>\n If a company is unwilling to meaningfully engage in advance of the annual meeting process, or a settlement cannot be reached on terms the activist believes are necessary to drive shareholder value, activists can utilize a variety of pressure tactics outside of soliciting shareholder votes. In addition to traditional letter-writing campaigns, activists now are using more sophisticated media and digital strategies to make their case for change, exert pressure on companies and gauge and build stakeholder support.\u00a0 These tactics have become more refined and effective in targeting specific stakeholders, including institutional and retail investors.\u00a0 We are seeing activists use social media, campaign websites, digital ads, and interviews with the media to get their messages across and pressure companies.\u00a0 Activists are also widening their engagement strategy by holding investor calls, participating in investor conferences and hosting meetings and calls with a broad range of constituents, including other shareholders, institutional investors, sell-side analysts, industry experts and other key stakeholders.\u00a0 Companies are likewise doing the same in terms of increasing their off-season engagement efforts and utilizing advances in technology and social media to communicate with key stakeholders year-round and assess investor support and feedback.<\/p>\n Notable Off-Cycle Campaigns and Engagements<\/em><\/strong><\/p>\n As discussed above, off-cycle campaigns and engagements can come in a variety of forms and contexts.\u00a0 A number of notable examples that demonstrate the effectiveness of these tactics are included below.<\/p>\n Elliott Management at Southwest Airlines Co. (2024)<\/em><\/p>\n In June 2024, about one month after Southwest Airlines held its annual meeting of shareholders and re-elected its 14 person board, Elliott issued a public letter and presentation calling out the airline’s near-50% stock price decline over three years, and recommending that the company take action to improve performance by enhancing the board, upgrading leadership and undertaking a comprehensive business review. Two months later, Elliott announced its intention to nominate candidates for election to the board, and in October 2024, Elliott utilized its 10% share ownership to formally request that the company call a special meeting of shareholders, where shareholders would be able to remove eight incumbent directors and replace them with eight director candidates nominated by Elliott. While Elliott was making its case to shareholders, the company adopted a poison pill with a 12.5% trigger threshold, appointed a new director, and held an investor day to outline its own \u201ctransformational plan\u201d for the business. However, within two weeks after Elliott formally requested the special meeting, the parties entered into a cooperation agreement providing for the appointment of six of Elliott’s director candidates, with seven incumbent directors resigning.<\/p>\n Starboard Value at Autodesk (2024)<\/em><\/p>\n Starboard launched a public campaign at Autodesk in June 2024, criticizing the board for failing to disclose critical information regarding an internal investigation into the company\u2019s accounting practices known to the board prior to the deadline to nominate director candidates at the company\u2019s upcoming 2024 annual meeting.\u00a0 After the company refused to reopen the nomination window at Starboard\u2019s request, Starboard filed a lawsuit in the Delaware Court of Chancery seeking to delay the 2024 annual meeting and reopen the nomination window.\u00a0 The court declined to grant the requested relief and the company\u2019s 2024 meeting proceeded. However, Starboard was not deterred, and continued to publicly pressure the company and build support for its case for change. In March 2025, Starboard nominated three director candidates for election at Autodesk\u2019s 2025 annual meeting, reiterating concerns about egregious governance, missed financial targets, and inadequate oversight. \u00a0Shortly thereafter, Starboard and the company entered into a cooperation agreement, pursuant to which the company agreed to appoint two new directors to the board.<\/p>\n Broadwood Partners, L.P. at STAAR Surgical Co. (2025-2026)<\/em><\/p>\n STAAR Surgical agreed to sell itself to Alcon in August 2025. The transaction quickly came under fire from Broadwood Partners, the company\u2019s largest shareholder, holding about 30% of the company\u2019s stock. Broadwood argued that the deal undervalued the company and reflected a flawed, conflicted process, and ran a public campaign to gain stakeholder support for its views and oppose shareholder approval of the transaction.\u00a0 Facing negative feedback from proxy advisors and poor prospects for obtaining the required shareholder approval at a special meeting called by the company, even after a bump in price from Alcon, the company repeatedly adjourned the meeting. However, Broadwood maintained its opposition to the deal and threatened to call a special meeting to remove certain directors.<\/p>\n In January 2026, the company held the special meeting and shareholders did not approve the transaction, after which the agreement with Alcon was terminated. Within days, the company entered into a cooperation agreement with Broadwood under which three new directors were added to the board, including Broadwood’s founder Neal Bradsher as incoming chair, and both the CEO and the incumbent chair resigned.<\/p>\n Shareholder Activism as a Year-Round Process<\/em><\/strong><\/p>\n As seen in the situations discussed above, shareholder activists have been successful in effecting meaningful change at companies outside of the annual meeting process via off-cycle campaigns and engagement in a variety of contexts. We expect to continue to see more of this off-cycle activity. \u00a0These campaigns often occur when shareholders believe immediate action is needed to serve the best interests of shareholders and other stakeholders, particularly in event-driven situations, where shareholders cannot wait until the next annual meeting cycle to spur change.\u00a0 This may involve a company vote on a major transaction or related matter, or other game-changing company announcement that the activist believes will lead to destruction of shareholder value.\u00a0 Depending on the company\u2019s governing documents, the activist may have the opportunity to submit director nominations and other shareholder proposals at a special meeting of shareholders or via a consent solicitation.\u00a0 Shareholders are in the strongest position to pressure a company in the off season when they have the ability to effectuate change to the board outside of the annual meeting nomination process, such as by removing and replacing incumbent directors or expanding and adding new directors to the board. \u00a0However, these are not necessary conditions for success and activists will not hesitate to pursue alternative strategies to drive change.<\/p>\n Experienced activists understand that they can use the period between annual meeting cycles to gauge the sentiment of other stakeholders, test the company\u2019s willingness to meaningfully engage and consider making changes, or seek to build investor support for a potential director election contest down the road.\u00a0 With both companies and activists typically seeking a negotiated resolution to avoid an election contest, this can create the right conditions for a settlement that fits the situation and leaves everyone with a win.\u00a0 Even if an activist is not able to reach a negotiated resolution initially, by demonstrating their knowledge of the company and willingness to stick around and escalate pressure, and using sophisticated media and engagement strategies to communicate with stakeholders, activists know that their leverage will only continue to grow as next year\u2019s nomination window approaches, increasing the likelihood of a positive outcome.\u00a0 As a result, we expect that activism will continue to develop as a year-round process, not solely confined to campaigns clustered around nomination windows and company annual meetings.<\/p>\n","protected":false},"featured_media":0,"template":"","class_list":["post-144828","hot_topics","type-hot_topics","status-publish","hentry"],"acf":[],"_links":{"self":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/hot_topics\/144828","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/hot_topics"}],"about":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/types\/hot_topics"}],"wp:attachment":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/media?parent=144828"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}