America’s corporate boards are under siege

Proxy season was once a tedious but largely predictable time of year for America’s corporate boards. Most annual shareholder meetings went off without a hitch. Informal discussions with large shareholders (preferably over a long lunch) meant directorships and pay packets were all but sure to sail through. The paperwork was irksome—but only for board members who bothered to read it.

Nowadays boardrooms are transformed into war rooms from April to June. Activist investors prowl the corporate landscape looking for ponderous companies to pounce upon. Regulatory changes are curtailing the mechanisms once used to keep pesky shareholders from causing trouble. Directors are entering a “Wild West of a proxy season”, says one adviser. Many have little idea what it will bring.

America’s boards have had a turbulent few years. In 2020 campaigners began pushing them to appoint more directors from under-represented social groups. In 2021 regulators approved a rule introduced by Nasdaq compelling companies listed on its exchange to have at least two who fit that bill. Many companies went further. Environmental warriors added demands of their own; in 2021 a campaign at ExxonMobil, America’s biggest oil producer, resulted in the appointment of three sustainability-minded directors.

As wokeism has receded, boards have faced fewer such demands. Some have quietly dropped their diversity commitments. But they are instead contending with agitators of the cold-blooded capitalist variety. Last year set a record for shareholder activism, with 163 campaigns in America, according to Lazard, an investment bank (see chart). Board shake-ups were among the most common demands. On April 9th CarMax, a second-hand car retailer, said that it would appoint two directors favoured by Starboard Value, an activist hedge fund, to avoid a showdown at the company’s upcoming annual meeting.

Activist gadflies have been aided by various regulatory changes. Since 2022 shareholders have been able to pick and choose directors from across the lists proposed by companies and activists, rather than opting for one line-up in its entirety, making it easier for interlopers to win a seat. It has helped that activists these days tend to propose more experienced candidates than they once did. “Ten years ago companies could tell activists to pound sand,” recalls Jim Rossman of Barclays, another bank. “Now they can’t.” In 2025 activist shareholders won three-quarters of the board seats they sought in America, up from an average of less than two-thirds over the preceding four years.

Other shifts in corporate governance may further weaken boards’ grip on their companies. Many asset managers rely on proxy advisers to tell them how to vote on proposals from management and others. As a result, the recommendations of Glass Lewis and ISS, the dominant advisers, give boards a sense of which resolutions are likely to win approval. The proxy duopoly, however, is now under threat from President Donald Trump, who in December accused the pair of using “their substantial power to advance and prioritise radical politically motivated agendas”, and instructed regulators to investigate them. The asset-management arms of JPMorgan Chase and Wells Fargo, two banks, subsequently said they would reduce their reliance on the advisers.

Complicating matters further, the Securities and Exchange Commission, a financial watchdog, last year released guidance saying that asset managers which define themselves as passive investors (a designation that brings less regulatory paperwork) risk losing that status if they communicate too much with boards. The Trump administration’s intent is to clamp down on what it sees as efforts by passive giants such as BlackRock to push their political agendas on companies. A consequence, however, will be that boards are deprived of a vital source of information on whether shareholders are likely to approve, for example, a big transaction, says Peter da Silva Vint of Jasper Street, a firm that advises companies on shareholder relations.

Gone are the days when boards could thrash out “backroom deals” in advance of contentious votes, reckons Mr da Silva Vint. As shareholders prepare to gather for this year’s round of annual meetings, plenty of drama awaits. ■