Buckle up: US proxy season promises to deliver a wild ride.

Tom Brown, Associate Director, Strategy at Bladonmore, delves into the 2025 US proxy landscape in a time of swashbuckling proposals and rampant uncertainty.

Shareholder campaigns pressuring companies to boost performance leapt by 46% in the first quarter of 2025. In these three months alone, 51 board seats were obtained through proxy fights and settlements, a 34% increase over the same period last year, according to data from Barclays.

This frenetic activity comes on the heels of last year’s feisty proxy season, one in which shareholders targeted companies in record numbers.

As the rapid-fire plot twists from the second term of Donald Trump’s presidency kick up drama in almost all corners of the US economy, it’s no surprise that the shareholder activism landscape is being affected too.

A report by APCO Worldwide puts it this way: ‘The return of Donald Trump to the White House has unleashed a business-friendly agenda…. Activists are energized by this environment, ready to capitalize on opportunities created by lower valuations, volatile markets and favorable regulatory conditions.’

Go big or go home

An early reading of the tea leaves indicates that shareholder proposals for the 2025 proxy season will be bolder than usual. The APCO report suggests that dramatic changes, including efforts to remove a CEO, are suddenly on the table. This trend began picking up steam last year. In 2024, 67 US CEOs left their jobs after an activist encounter, nearly triple the 24 who did so in 2023.

Investor relations officers (IROs) are watching closely, especially given the high levels of support some proposals are garnering. As of February, support for shareholder proposals was 5% higher than it had been at the same time last year, according to The Conference Board.

Look no further than what’s happening at Lyft to see how boards and management teams are feeling the squeeze from shareholders willing to voice strong opinions. Hedge fund Engine Capital Management recently nominated two new director candidates to Lyft’s ten-person board as a way of forcing the ride-sharing giant to overhaul strategy and tend to its ailing stock price.

While the outcome of such pressure will not be known until the annual shareholder meeting on June 13^th, moves like this are spurring IROs and executive management teams to communicate justifications for actions that once would have gone unquestioned.

ESG and DEI in decline

Average support for proposals classified as ESG (environmental, social, and governance) and DEI (diversity, equity, and inclusion) declined in 2024. Proxy advisor ISS Governance is convinced that this trend will continue and even accelerate.

ISS Governance’s Global Head of Research Georgina Marshall has said: ‘Many investors and their portfolio companies alike will face challenges during the annual meeting seasons this year reflecting economic and political changes and uncertainties….’

Not only is support for certain proposals waning, but so are the sheer numbers of these types of proposals being filed. As of February 21^st, there were 355 ESG proposals filed at US companies for the 2025 proxy season, a drop of roughly one third (34%) from the same time last year, according to a new report by As You Sow and Proxy Impact.

That report noted that shareholder proposals were also being withdrawn at much higher rates than usual. In the first eight weeks of 2025, 78 proposals were withdrawn (around 22% of the total), relative to 7.7% for the same time last year.

Of the ESG proposals that are getting filed, climate change remains the top issue that shareholders and activists are targeting.

At the same time, the popularity of anti-ESG and anti-DEI proposals is exploding. A full one-fifth of all shareholder proposals that had been filed as of February target ESG or DEI, according to the Conference Board.

SEC changes come into effect

Some of the impetus for these changes comes from the Securities and Exchange Commission (the SEC). In February, the SEC rescinded prior guidance on shareholder proposals, making it easier for companies to exclude certain proposals from the proxy.

In technical terms, the SEC amended prior compliance and disclosure interpretation (C&DI) guidance for Regulations 13D and 13G. Prior to this change, guidance stated that a proposal could not be excluded for a reason, such as it ‘did not demonstrate that the human capital management issue was significant to the company,’ according to international law firm Cooley.

In non-technical terms, companies will now have an easier time excluding proposals for being too narrow (micro-managing) or too broad (not unique to the company’s own circumstances).

While the full impact of the SEC’s rule changes in a fast-changing US regulatory environment remain to be seen, it appears that some ESG and DEI shareholder proposals that reached a vote in prior years are now less likely to see the light of day.

Wonder what all this means for you? If you have questions about evolving proxy concerns, get in touch.