Corporate Governance

Shearman & Sterling LLP Recent Shareholder Activism Trends | 18 0 32 77 2019 2020 2021* 7 83 13 33 34 77 13.0 23.5% 42.3% 31.2% Environmental proposals are also receiving more support from shareholders in the 2021 proxy season. Approximately 38% of all environmental proposals that were voted on this year received majority shareholder support, compared to none in 2019 and about 21% in 2020. The average support for all environmental proposals voted on also increased (by more than 10% compared to 2020). 4 Total Proposals Voted On Received Majority Vote % of For We expect to see activists continuing to pivot to ESG issues in their campaigns and that companies that are both behind on ESG issues and financial underperformers will be more vulnerable to activist campaigns. We also expect shareholders to continue to engage on E&S issues inside and outside of the proxy ballot. It remains to be seen at what pace ESG-focused activist funds will grow or whether ESG issues will become a primary campaign objective given the perceived tension between the ESG-themed impact investing strategy and the conventional activist objectives of maximizing shareholder returns. CONVERGENCE OF ACTIVISTS AND PRIVATE EQUITY The convergence of activist investing and private equity persisted throughout the COVID-19 pandemic: Activists pursuing new pool of capital and engaging in acquisitions Several activist funds, including Hudson Executive Capital, Pershing Square, Starboard Value and Elliott, found new avenues for raising capital during the SPAC frenzy of 2020–2021, and have deployed capital raised in SPAC IPOs to engage in heighted M&A activity. Activist investors are also finding inroads into new publicly listed companies by participating in PIPE investments associated with many of the de-SPAC transactions, alongside private equity firms (e.g., ValueAct's investment in the EV maker Nikola and Inclusive Capital's investment in AppHarvest, an agriculture technology company). Certain activists are also turning to what was once known as private equity turf — privately held companies — in an attempt to seek the lucrative gains enjoyed by private equity in these investments and gain access to additional information that can help inform other investment decisions. Private equity deploying activist tactics Private equity firms continue to make activist-like moves, including by amassing ownership stakes in public companies, engaging more actively with management and running proxy fights. KKR acquired a 10.7% stake in the restaurant and entertainment company Dave & Buster's in early 2020 and signaled a desire to engage with the board or management and to seek board or management changes, or a possible transaction. KKR later secured a seat on Dave & Buster's board. In September 2020, New Mountain Vantage Advisers (NMV), holding approximately 10.8% of the common stock of the IT services company Virtusa, launched a campaign against Virtusa calling for immediate board change at Virtusa to drive what it described as long-overdue corporate governance reform and management accountability. NMV and Virtusa reached an agreement in October in connection with NMV's nominations for directors. Activists and private equity teaming up While activists and private equity investors have continued to borrow from each other's toolboxes, they have also increasingly teamed up on strategic campaigns. Hedge fund Senator Investment Group joined Cannae Holdings in a buyout offer of the property data company CoreLogic, and Hudson Executive Capital joined private equity firm Apollo Global Management in a buyout offer for the ATM operator Cardtronics, while Elliott pursued a takeover of the public transportation and defense company Cubic with private equity firm Veritas Capital and worked with frequent ally Bluescape Resources against Evergy, the utility company. 4 Source: Deal Point Data. Proposals are limited to Rule 14a-8 proposals for meetings during the relevant period and for 2021, with a proposal proxy filing date on or before August 31, 2021. * All environmental proposals for meetings between January 1, 2021, and December 31, 2021, with a proposal proxy filing date on or before August 31, 2021. Environmental Proposals

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