Shearman & Sterling LLP Recent Shareholder Activism Trends | 21
press companies to explain the actions
they took (or did not take) as the crisis
unfolded, especially as it relates
to managing their workforce and
executive compensation. If the crisis
exposes governance shortcomings,
then activists may want to push
forward replacements who they
believe would be better managers
and would mitigate risks relating to
executive succession and diversity
(or lack thereof).
Although ISS/Glass Lewis have
acknowledged that ESG actions may
be delayed and that corporations
may need to adopt defensive
measures like poison pills during the
crisis, they have also insisted that
ESG is as important as ever as
companies navigate the "new normal"
created by the COVID-19 pandemic.
Expected areas of heightened focus
include human capital management
("with widespread layoffs, varied
treatment of employees, concerns
regarding quality healthcare and
the failure to provide safe working
environments at many companies, this
shareholder concern is likely to have
2
Glass Lewis, COVID-19: The New Rules for ESG, May 18, 2020, https://www.irmagazine.com/research-reports/covid-19-new-rules-esg.
a breakout moment in shareholder
proposals next year," predicts Glass
Lewis)
2
, racial and gender diversity,
climate change and risk management.
The COVID-19 pandemic may have
temporarily quieted new activist
campaigns, but the conditions that
forced the slowdown will soon
dissipate. That some activist firms
spent the first half of 2020 buying
stock at low prices suggests that
certain well-capitalized firms are
spending their time in quarantine
preparing to restart their campaigns.
So while companies may have enjoyed
a temporary reprieve from shareholder
activism, those that fail to proactively
and effectively address the issues
brought to the fore by the COVID-19
pandemic do so at their peril. When
activist campaigns resume, companies
may find themselves more vulnerable
than they were before the COVID-19
pandemic, and with activist ranks
continuing to grow, a broader and
more powerful base of shareholders
may be in the wings waiting for activist
engagement to resume.
