Activism and ESG in the Wake of Current Events


In the wake of current events, including the coronavirus pandemic and the Black Lives Matter movement, activism and ESG have become areas of focus for both companies and investors. To explore these issues and their effects on companies in the near future, CorpGov and Vinson & Elkins LLP recently hosted the second webinar in their 2020 Governance Series: Activism and ESG.

The webinar consisted of two panel discussions: The first explored the 2020 proxy season, defensive measures, and market considerations for the second half of 2020. The second panel focused on the intersection of ESG and diversity.

Below, we provide highlights from the two panel discussions.

Coronavirus and the Recent Proxy Season

This has been a unique proxy season, with many activists either withdrawing or settling campaigns. Many experts anticipate those campaigns coming back in one form or the other, once the activist sees how the board and management team has managed through the pandemic.

When it comes to defensive measures, many companies adopted stockholder rights plans, or poison pills, when the market plunged earlier this year. That happened during the height of uncertainty around coronavirus; however, with the growing possibility of a second wave of the pandemic, we may see a continued increase in poison pill adoption.

Activism in the Second Half of 2020

In the second half of 2020, many of the panel experts expect an uptick in activism activity, including nontraditional activists, in terms of private equity and large investors that feel like there’s an opportunity given the movements in the market.

With that in mind, vulnerable companies should begin taking precautionary steps now, including looking at your corporate governance practices, evaluating your board composition, gathering information from proxy advisory firms, and overall, conducting a comprehensive self-diagnostic analysis on your company.

Diversity and ESG

It has been proven that diversity improves board performance. However, while boards have become more diverse in recent years, change has been slow. Now, there is growing pressure from investors to increase diversity, on the basis of race and gender, as well as in terms of experience, skills, and professional backgrounds.

In recent months, many companies have taken steps to show their commitments to diversity and support for the Black Lives Matter movement through CEO letters and press releases. However, these statements must be grounded in corporate strategy, and your messaging must be consistent.

Increasingly, activists and investors are emphasizing the need for a diverse board of directors and directors that have ESG credentials. Considering that CEOs are facing an incredibly challenging business environment, from a pandemic to a trade war to nationwide protests, having a diverse board that can counsel CEOs on how to address these issues is more valuable than ever.

For additional insight on these issues and the full commentary from panelists, click here to listen to the full webinar recording.