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Illustration: Aïda Amer/Axios

Big companies have been cutting deals with activist shareholders, putting away the boxing gloves as a way to dodge negative publicity.

Why it matters: While activists are making a lot of noise, the silence —and behind-the-scenes dealmaking — is more representative of what's really going on.

The big picture: With investors of all sizes pressing their agendas on public corporations — from hedge funds seeking to block mergers to issue-oriented shareholders pursuing social and environmental agendas — top executives have started negotiating upfront, aiming to reduce the number of loud confrontations and proxy battles.

American-style activism has caught on abroad and is rising in countries like the U.K. and Japan. But in the U.S., where investors first started building up stakes in companies and picking high-profile fights, the number of public showdowns is way down this year, despite some splashy exceptions.

  • Not since 2015 have so few U.S. companies faced public demands from activists in the during this spring’s big proxy season, which runs through the end of June, according to research firm Activist Insight.
  • Activism outside of the U.S., meanwhile, is spiking. The U.K. had its busiest first-quarter in recent years while Japanese companies saw a record 30 campaigns last year, per CNBC.

Between the lines: American companies have grown more experienced and sophisticated about managing shareholder activism, aided by armies of lawyers, consultants and bankers who have built up specialized practices in this field.

In their dealings with hedge funds, U.S. companies are often settling before a disagreement escalates to an all-out proxy fight. In the first quarter, all of the corporate board seats gained by hedge funds were won via settlements, according to Lazard.

  • Bed, Bath & Beyond, under pressure, gave 4 board seats to a trio of activist hedge funds and booted its CEO.
  • PG&E, the utility, settled with hedge funds that wanted to switch up its board and select a new CEO.
  • Campbell Soup settled with activist hedge funder Dan Loeb just days before a fight was put to a shareholder vote, giving him some board seats and input on choosing the next CEO.
  • "Proxy fights are very expensive and distracting for management efforts," Paula Loop, head of PwC's Governance Insights Center, tells Axios. “It's a lot less costly to settle, in most cases.”

Unlike in the past, there's a lot of U.S. shareholder activism that Wall Street and Main Street never hear about.

  • Behind-the-scenes negotiations have led to fewer ESG proposals — environmental, social, governance— making it onto the ballots at companies’ annual shareholder meetings this spring.
  • More proposals are being withdrawn, a recent trend that's expected to continue this year, according to ISS, a proxy advisory firm. This typically happens when a company and a shareholder group reach a truce behind closed doors.
  • "Companies are more willing to discuss, more willing to listen, and it de-escalates the situation," Jason Day, a partner at the law firm Perkins Coie who advises public companies on stockholder activism, tells Axios. “Or the company has a nice conversation, and it doesn't move to the public sphere."

The other side: This trend by no means spells the end of big, public battles.

  • Bill Ackman, who has a big stake in United Technologies, came out against the company’s tie-up with Raytheon.
  • Carl Icahn has sued Occidental Petroleum, after opposing its plan to purchase Anadarko.
  • Dan Loeb, who also opposes the United Technologies/Raytheon deal, is pushing Sony to sell its semiconductor business.

There’s been lots of headline-grabbing activity on the ESG front, primarily among issue-oriented shareholders. Asset managers and proxy advisors who recommend how shareholders should vote —who typically don't stir up controversy during proxy season, but whose weight can sway management — have lately been starting to align themselves with ESG issues.

  • HSBC Global Asset Management is a part of a group asking companies like ExxonMobil and Amazon for more transparency about the environmental impact of their operations.
  • Glass Lewis, the proxy advisory firm, came out this year to recommend that shareholders vote against nominating committee chairs on boards without a single female director.

Go deeper: The cannibal of Sears

Go deeper

Senate Democrats reach deal on extending unemployment insurance

Photo: Alex Wong/Getty Images

Senate Democrats struck a deal Friday evening to extend unemployment insurance in President Biden's $1.9 trillion COVID-19 relief package after deliberating and halting other action for roughly nine hours, per a Senate aide.

Why it matters: The Senate can now resume voting on other amendments to the broader rescue bill.

Capitol review panel recommends more police, mobile fencing

Photo: Olivier Douliery/AFP via Getty Images

A panel appointed by Congress to review security measures at the Capitol is recommending several changes, including mobile fencing and a bigger Capitol police force, to safeguard the area after a riotous mob breached the building on Jan. 6.

Why it matters: Law enforcement officials have warned there could be new plots to attack the area and target lawmakers, including during a speech President Biden is expected to give to a joint session of Congress.

Financial fallout from the Texas deep freeze

Illustration: Annelise Capossela/Axios

Texas has thawed out after an Arctic freeze last month threw the state into a power crisis. But the financial turmoil from power grid shock is just starting to take shape.

Why it matters: In total, electricity companies are billions of dollars short on the post-storm payments they now owe to the state's grid operator. There's no clear path for how they will pay — something being watched closely across the country as extreme weather events become more common.

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