TheCorporateCounsel.net

Here’s a scary stat from a Bain CFO survey that I shared last week on the Proxy Season Blog:

There are now about 1,000 activist campaigns per year, and 25% of CFOs expect their company to be a target in the next 2 years.

This Skadden memo says that lengthy director tenures are an increasingly important factor in activists’ decisions to target a company – and they aren’t doing companies any favors when a contested election goes to a vote, either. Here are the key takeaways:

– Proxy advisory firms and institutional investors increasingly view tenures over nine years as too long, questioning the independence of directors who have served longer than that.

– Board refreshment is a frequent demand of activists, so companies may find themselves vulnerable to activist campaigns if they have very long-serving directors.

– As boards review their own composition for skills and other attributes, they should explain to investors the value that long-serving directors bring to the board.

– While few U.S. companies have formal tenure limits, age limits are more common but less favored by proxy advisory firms.

The memo says that 67% of activist campaigns since 2021 have targeted companies with three or more directors who have served 10 years or more, according to Evercore’s Third Quarter 2024 Quarterly Review. As that last point above alludes to, recent survey results indicate that mandatory retirement is still a widely used tool for board refreshment – but companies are also amping up their evaluation practices.

– Liz Dunshee