Recent regulatory changes and shifting investor priorities are redefining how companies engage with shareholders – and how activists wage campaigns. The 2025 proxy season has proven to be a turning point, marked by heightened caution, evolving tactics and a dramatic retreat from previously hard-earned progress in engagement.
According to Elizabeth Bieber, partner and head of shareholder engagement and activism defense at Freshfields, much of this upheaval can be traced back to the SEC’s recent guidance related to Regulation 13D-G. Though technically not a rule change, the guidance had an outsized impact.
‘The guidance significantly altered the landscape,’ she tells Governance Intelligence. ‘The interesting part is that it’s guidance – the law and rules have not changed. There was no notice and comment period. Yet, the changes in engagement have been as significant as if there were new legislation.’
Released mid-season on February 11, 2025, the guidance prompted an immediate response from institutional investors. ‘Nearly every large institutional investor changed the way that it engaged with companies,’ Bieber explains. ‘Many of them shut off engagement until they could wrap their arms around their analysis of the guidance.’
At issue was uncertainty over whether ordinary engagement activities could be interpreted as requiring a Schedule 13D filing, which carries significant disclosure requirements. Investors found themselves analyzing whether speaking with companies, or even maintaining their standard voting policies, could expose them to regulatory scrutiny.
The fallout was immediate: ‘It is not uncommon for us to see investors that are subdued in meetings,’ says Bieber. ‘They don’t engage as much and they rely on companies to address the most significant issues without prompting.’
Elizabeth Bieber, partner and head of shareholder engagement and activism defense, Freshfields
This level of disengagement is particularly jarring when contrasted with the prior decade’s progress in proactive, transparent shareholder-company communication. ‘Pre-February 2025, many companies valued and actively sought out the views of their investors as they embarked on changes to their governance structure, compensation and other matters that investors express interest and care,’ says Bieber. Now, that flow of feedback has largely dried up.
Some had hoped that the intense reaction would subside over time. But Bieber is not optimistic: ‘I’m not sure it will. The reason is that this is the middle ground – the initial reaction was to shut off engagement.’ Although the SEC’s intent may have been to curb outlier behavior, the result was far broader in scope. ‘What it did was instead of moving the marker back just to capture that egregious behavior, it captured much more,’ she adds. Without further clarification from the SEC, Bieber believes the muted engagement could persist indefinitely.
In the face of this uncertainty, companies are being advised to adjust their strategies accordingly. Bieber emphasizes the need for a proactive approach: ‘When investors are less willing to engage openly with companies, it puts pressure on companies to redouble their engagement efforts to ensure that their message gets across and they address any concerns that investors have that go unsaid.’
Making matters more complex, institutional investors are evolving their internal structures. Some are dividing governance teams and investment teams or offering clients direct voting capabilities. This means companies can no longer assume that the person they’re meeting with represents the full voting power of an institutional position. ‘If a company thought it was meeting with an institutional investor that was a significant holder, it may be meeting with the team responsible for voting only a fraction of the position,’ says Bieber.
This trend reinforces the need for companies to broaden their engagement strategies. Bieber notes: ‘Companies may expand their engagement to focus on a greater number of investors, including those who traditionally never own more than 5 percent of a company’s equity and are unaffected by the 13D-G changes.’
While regulatory changes have reshaped the mechanics of engagement, activist strategies have also seen a notable shift. One of the most visible changes is the retreat from ESG-focused campaigns. Bieber attributes this to changing investor sentiment: ‘We’ve been seeing what we at Freshfields have called a retreat to safety, or back to basics across the significant stakeholder landscape,’ she explains.
While ESG was once used by activists as a wedge to rally support, its utility is waning as mainstream investors scale back their ESG commitments. ‘As other significant institutional investors place less emphasis on those issues, activists are rapidly adjusting the focus of their wedge issues, as well,’ Bieber adds.
Another emerging trend is the increased focus on CEOs. Though activists have long influenced executive turnover indirectly through board seats, there’s now a more direct focus on leadership. ‘It has long been true that if an activist gets representation on the board, there tends to be significant CEOs turnover within two years,’ Bieber notes. Yet, activists rarely attempt to oust a CEO through a proxy contest: ‘Beheading the CEO through their director seat doesn’t make a lot of sense.’ Rather, pressure builds behind the scenes as boards and investors respond to perceived failures in strategy, execution or reputation.
In this environment, boards must remain unified and vigilant. ‘First the board and management need to be aligned. There can’t even be the suggestion of a rift behind closed doors, which can be easily exploited,’ Bieber warns. Proactive governance, or what she calls a ‘be your own activist strategy,’ is essential. ‘If the board doesn’t believe in management, it should be addressed sooner rather than later.’
Looking ahead, Bieber anticipates that external pressures – economic, geopolitical and regulatory – will continue to drive activism. ‘There are a lot of macroeconomic factors that are going to result in companies that are winners and companies that are losers,’ she says. The impact of tariffs, inflation or policy shifts can quickly create disparities in performance, making underperformers ripe targets. ‘In an environment where there will be clear winners and losers… it creates fertile ground for activists to offer alternatives and criticize the company, its management, board and strategy.’
M&A activity is also on the radar. With dealmaking on the rise, execution becomes a critical differentiator. ‘Companies that make smart acquisitions or divestitures are less likely to be targeted. Companies where the M&A strategy is not working as well are also more likely to be more targeted.’
Taken together, the current landscape demands a new level of sophistication in both engagement and defense. As regulation alters the playing field and activists evolve their tactics, companies must remain agile, proactive and transparent, often without the benefit of direct feedback from their largest investors.