Shareholder Advisory / Activism Defense

Why Laz

- Boutique and independent advisory firm creates a lot of opportunities for analyst development
- Have the resources that come with working at a global firm
- Everyone i've spoken to has emphasized how you have room to grow and build a unique career at lazard

What do activists target

Companies have high or proven growth/turnaround potential and strong cash flows

1. Underperformance in share price/relative valuation

2. Near term operating performance and costs

3. One segment is lagging in its sum of the parts valuation

4. M&A, leverage, capital return

5. Governance, captive board, compensation, minimization of shareholder involvement, etc
also need shareholder dissatisfaction or minimal involvement

Why shareholder advisory

Poison Pill

When one owner takes on a certain % of stock, poison pill issues lower value shares automatically to dilute the stock

Staggered Board

divides board up into classes with different election years so as to prevent mass replacement in one year

supermajority provision

instead of 51% majority of the board, increase to 67% for major corporate actions

How does proxy battle work

group of shareholders is trying to collect enough votes to make changes
- company has its nominees
- activist has its nominees
- try to get votes for your nominees
- if management owns a lot of the stock then this is tricky

How to be ready

- have a team in place, be familiar with the hedge funds in the industry that have targeted similar businesses and what their tactics are
- communicate strategy
- monitor capital allocation
- monitor newsflow, trading

trends in activism

• Shareholder activism reached a new high in H1 2026, with campaign activity rising 20% year-over-year and 38% above the five-year H1 average

• Record activity in the U.S. and a sharp acceleration in APAC more than offset a moderation in Europe

• Fewer, but more prolific activists were responsible for the activity; the share of activists launching more than one campaign was elevated in H1 2026 (30% vs. 23% in H1 2025)

Universal proxy

Historically could either pick company slate or dissident slate in proxy voting, can now mix and match as all candidates are on one card. 3/10 proxy challenges won seats in the US and suggested that this was not as impactful as others previously thought

How to respond (non public position)

- respond , meet with activist and understand requests
- determine a disclosure strategy
- have public responses ready in the case of activist disclosure
- are there any measures that can be taken so that business can undermine activist
- should negotiation be pursued and when

how to respond (public)

- respond w initial will consider, determine whether something substantive is needed
- meet w board to consider the communication
- determine whether or not to meet with the activist
- make any non negotiables clear
- gauge whether action should be taken to avoid a proxy fight
- assess shareholder sentiment
- maintain strong operating performance

How to respond when activist asks to divest one of the business lines

- respond, meet to understand their request in full
- have disclosure strategy, public responses ready
- be prepared to articulate why the businesses are worth more together (broader customer footprint, avoid duplicative back office, duplicative manufacturing, outline plan for improved execution, tax inefficient, standup costs, can it be independently successful or does it need a buyer)
- are there are any short term actions that can be taken

Activists and their strategies

Elliott: largest, wide array of strategies, employ litigation, longer term engagements (crown castle, twitter, hon, txn)
Starboard: More focused on operations, have a consumer specialty (olive garden, Kenvue, CRM)
Jana: typically Push for M&A (whole foods, WOLF)

what is the role of index funds in shareholder voting

1. high concentration of voting power, big 3 make up 20% of S&P
2. focus more on governance and board makeup than operations, publish guidelines on key issues
3. rely on advisory firms like iss or glass lewis

what would cause an index investor to increase their allocation in a stock

1. if the stock's weight in the index increases
2. the actively managed part of the index investors has increased

how does the proxy advisory and index relationship work

1. general guideline-based recs issue by issue across firms and ad hoc diligence
2. some large investors now have private teams
3. potential conflicts of interest if they are also engaged by company

What are the typical shareholders in a name

1. index funds and mutual funds
2. pension funds, insurance
3. endowments
4. banks
5. sovereign wealth
6. retail
7. insiders/employees

Yield/Growth/Value

1. Yield: looking for dividend and buyback, stability in fcf
2. value, undervalued business where earnings can grow, strong competitive positioning
3. growth: look for above market top line growth, care less about valuation

what does it mean if one company has more of an index allocation than another assuming equal weights

means that the company with more is also receiving $ from their active funds

what is the implication for activism/proxy if there is more retail in one stock than another

this is a bit of a black box, this could indicate that
1. retail sometimes does not show up to vote or votes erratically, making it easy for an activist to win (fewer voters needed to win over)
2. sometimes retail forms cults of personality around management, hard displace

13D/13G changes

13D: filed when a shareholder owns more than 5% and intends to make changes to the business governance etc
13G: for passive owners who own more than 5%
- recent Trump admin guidelines make it such that you can lose 13G eligibility if passive presses on ESG, poison pills, staggered boards

Trends in index shareholding

- Pressure on big 3 to be less controlling, all have introduced measures to allow retail to have input
- proxy firms/advisors have to update their guidelines in response to trump admin
- passive money becoming more & more prominent, larger % of vote
- supporting activists when causes align (big 3 supported engine against exxon, Jana Apple)

What is on a proxy ballot

1. Board members
2. Auditor
3. Other shareholder proposals (pay, M&A, ESG)

Independent, affiliated, inside directors

Independent: no link to the company, its management team
affiliated: established familial/financial link to the company
Inside: member of the company

BLK Guidelines

emphasize independence of directors, board oversight, capacity of board, succession planning, term limits, composition, voting structure

how should firms think about communicating proxy advisors

have to communicate that you think thoughtfully and are aligned on issues outlined by guidelines