Shareholder Activism Hits Five-Year High
A new report from Diligent indicates that shareholder activism is at a five-year high, with investors increasingly focused on M&A demands and executive compensation. The analysis reveals a surge in activist campaigns challenging board decisions and pay structures, signaling heightened scrutiny for publicly traded manufacturers.
- Activist investors are increasingly targeting the industrial sector, which accounted for 22% of global activist campaigns in the first half of 2025, making it the most targeted sector worldwide. These campaigns are moving beyond traditional M&A demands to scrutinize operational efficiencies and supply chain resilience, which have been tested by recent geopolitical instability and trade policy shifts. - Ongoing U.S.-China trade tensions and tariff policies implemented in 2025 are creating significant cost pressures and strategic uncertainty for manufacturers, a vulnerability that activists are beginning to exploit. For instance, 32% of manufacturers report plans to pass all tariff-related cost increases to customers, while 54% will absorb some costs, directly impacting margins and attracting investor scrutiny. - The U.S. Securities and Exchange Commission's (SEC) heightened focus on climate-related risk disclosures is creating new avenues for shareholder activism. For manufacturers, this means increased pressure to report on greenhouse gas emissions and supply chain vulnerabilities, with the SEC requiring disclosure of climate-related risks that materially impact business strategy and financial health. - Regulatory changes from the Occupational Safety and Health Administration (OSHA) and the Environmental Protection Agency (EPA) are becoming focal points for activist campaigns. Public disclosure of OSHA violations, for example, has been shown to not only impact the cited company but also to improve compliance at nearby facilities by 73%, indicating the reputational and operational risks that can attract activist attention. - The record number of CEO resignations following activist campaigns—32 in the U.S. in 2025, a 38% increase over the four-year average—signals a lower tolerance from boards for underperformance, especially in operationally intensive sectors like manufacturing. This trend underscores the importance of internal audit functions in proactively identifying and addressing operational and financial vulnerabilities before they attract activist attention. - Activists are leveraging supply chain disruptions as a key campaign theme, targeting companies for their handling of logistical challenges and inventory practices. This operational focus is a departure from purely financial metrics and requires manufacturing clients to demonstrate robust supply chain visibility and resilience to withstand scrutiny. - Internal audit departments are being repositioned to provide oversight on strategic vulnerabilities that attract activists, including flawed business processes and poor execution of strategy. There is a growing need for internal audit to not only ensure compliance but also to advise boards on the operational weaknesses and governance gaps that could make the company a target.
