A Morgan Lewis “white paper” takes a deep dive into what companies should be preparing for when it comes to shareholder activism during the 2021 proxy season. Here’s the intro:
The shock, turmoil, uncertainty, and lack of visibility that followed the immediate onset of the coronavirus (COVID-19) pandemic in March 2020 were significant factors accounting for why shareholder activism was relatively subdued during the 2020 proxy season. However, given that activist investors have now had more than eight months to acquire their “sea legs” and recalibrate their playbook for the evolving “new normal,” it is likely that, even as the COVID-19 pandemic shows no signs of abating, activist investors will be less reluctant to wage an activism campaign in whatever “new normal” we find ourselves in during the 2021 proxy season.
Notably, unlike with respect to the 2020 proxy season, activist investors currently planning for the 2021 proxy season are making those plans aware of the existence of the COVID-19 pandemic and its evolving implications and having to anticipate and incorporate into their plans the possibility that, even if the current COVID-19 case surge is reversed and further extended lockdowns are avoided, the COVID-19 pandemic is not likely to materially subside between now and the end of the 2021 proxy season.
In addition, as we will discuss below, we are likely at a point where the COVID-19 pandemic may be more of a catalyst for shareholder activism than an inhibitor. Accordingly, companies should not expect that shareholder activism during the 2021 proxy season will be as subdued as it was in 2020.
The white paper reviews how activism was impeded by COVID-19 during 2020, and addresses the factors that may result in the pandemic becoming a catalyst for shareholder activism during the 2021 proxy season. It also lays out other forces that could drive activism this year, how COVID-19 may have created vulnerabilities for companies, what to expect from activists during the upcoming proxy season, and how companies can avoid being “sitting ducks” for activists.
-John Jenkins, DealLawyers.com November 19, 2020
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