The 2023 proxy season has not officially begun, but activists are already making demands and threatening proxy fights for the New Year. As of December 16, there were 235 outstanding demands by partial and full-time activists at 108 companies, according to Insightia data. Here are eight current activist campaigns that look most likely to turn into full-fledged proxy fights.

Politan Capital at Masimo Corp.
Demands: Gain board representation.

Medical technology company Masimo has done pretty much all it can to guarantee that any proxy fight with Politan Capital will be a bitter one. Politan disclosed an 8.4% stake in August, taking advantage of a sharp drop in the share price brought on largely by the $1 billion acquisition of speaker company Sound United, which sent the stock down 37% the day after that announcement.

Governance is another problem, with Masimo getting a “bad” rating from Insightia’s Governance module, largely because Joe Kiani has served as both chief executive officer and board chairman for 33 years. But rather than talk, the board approved a poison pill rights plan and bylaw changes such as an “extreme” change of control provision, that look designed to ward off Politan and other unwanted activists.

A clue to what demands Politan might make in a proxy fight can be found in the activist’s December 2021 settlement agreement with Centene, which gave Politan five board seats and forced the company’s CEO to retire.

Third Point at Bath & Body Works
Demands: Executive compensation.

Daniel Loeb’s Third Point Partners has in recent years rebranded itself as a constructivist. But its December 8 disclosure that it had increased its stake in Bath & Body Works to over 6% made clear the activist was ready to step up its engagement. Bath & Body’s board compensation committee “has made errors in structuring its executive compensation such that excessive awards have been made that are untethered to important performance metrics,” Third Point stated, adding that it “reserved the right” to seek changes in board composition and other value enhancement measures at or before the company’s next annual meeting.

Despite Loeb’s complaints, Bath & Body Works gets an excellent rating from Insightia’s Governance module. The company only settled with another activist three years ago, when it was known as L Brands, spinning off Victoria’s Secret during the pandemic. That said, board nomination and governance committee chair Patricia Bellinger saw lackluster support of 91.5% with dissenting shareholders citing a combined CEO and chair, a lack of ties between performance and executive pay, and a high special meeting threshold.

Hestia at Pitney Bowes
Demands: Remove CEO, gain board representation.

Kurt Wolf’s Hestia Capital Management made a lot of money from its campaign at GameStop, notably from selling out at the right time. However, Hestia is now targeting a majority of Pitney Bowes’ board seats and the appointment of a new chief executive to lead the shipping and mailing company. The 7.1% shareholder argued the company is a collection of ‘‘exceptional businesses’’ held back by its long-tenured leadership, particularly Chairman Michael Roth and CEO Marc Lautenbach.

“Given that the company’s total stockholder returns of negative 50% during Michael Roth’s 10+ years as Chair and Marc Lautenbach’s 10+ years as Chief Executive Officer, Hestia assumed the board and management would want to collaborate with a major stockholder on refreshing the board,” the activist wrote in an open letter.

Hestia’s campaign got a boost on December 14 when Swiss asset manager BWM, with a 1.5% stake, said in a blog post that it was supportive of Hestia’s push for a new leadership team.

Flashlight Capital Partners at KT&G Corp.
Demands: Divestiture, return cash, corporate focus.

Korea Tobacco and Ginseng Corporation (KT&G) was one of the first Asian companies to face activist demands, losing a proxy fight to U.S.-based Steel Partners in 2006. The stock has remained stagnant since then, however, resulting in domestic Korean firm Flashlight Capital Partners launching a campaign on October 25 with many of the same demands.

Flashlight, founded in 2020 by Carlyle Group’s former Head of Korea, Sanghyun Lee, called on KT&G to boost shareholder returns by improving corporate governance, returning cash to shareholders and divesting the company’s ginseng business as it has little synergy with tobacco.

On December 9 the activist complained that management had not offered a meaningful response, setting the stage for a possible showdown in one of the clearest examples of how domestic activists are stepping up in Asia even as international activists remain wary of the region.

Petrus at Temenos
Demands: Remove CEO, sale of company.

Activism is down in Europe, but London-based Petrus Advisers showed it is ready to fight the board of Temenos. It started with a small stake and calls for a strategy rethink. But after the Swiss banking software company slashed earning guidance, Petrus’ demands shifted to the removal of chief executive Max Chuard and Chairman Andreas Andreades and the launch a strategic review that could lead to an outright sale.

“After years of filling their pockets unashamedly, these individuals had their shot, blatantly misfired and must go,” Petrus wrote in a letter to the board. “They hang around Temenos’ tainted capital market reputation like vultures and should not be given the benefit of the doubt after such a long period of failure.”

Expect Petrus to also ‘hang around’ until it gets financial satisfaction. The activist waged a four-year campaign opposing Moneta Money Bank’s acquiring assets from its largest shareholder, PPF Group. The deal was finally cancelled in June.

Bluebell Capital Partners at Blackrock
Demands: Replace CEO, strategic review.

As seen with Engine No. 1’s win at Exxon Mobil in 2020, shareholders with small stakes can force change at big companies with a strong enough argument. That could be the case with Bluebell’s campaign at investment giant Blackrock, in which the activist argued that the investment giant is hurting its reputation and losing clients due to its high-profile but sometimes conflicted stance on ESG investing.

“As shareholders in BlackRock, we are increasingly concerned about the reputational risk to which you have unreasonably exposed the company potentially fueling a gap between the ‘talk’ and the ‘walk’ on ESG investing,” Bluebell wrote in a letter to the board. It wants Blackrock to ‘de-personalize” its stance on ESG by removing Larry Fink as chief executive and splitting the roles of CEO and Chairman.

Bluebell has proved willing to take on long-shot, long-term campaigns. While it lost a September proxy fight at Richemont due to insiders holding 50.8% voting rights the campaign compelled the luxury-goods company to revamp its governance and appoint a board representative for Class A shareholders. And in September, Belgian chemicals group Solvay pledged to “significantly” reduce the climate impact of its operations following a two-year campaign by Bluebell.

Impactive Capital at Envestnet
Demand: Gain board representation, removal of CEO, remuneration.

Impactive Capital has never fought a proxy fight, preferring to reach behind-the-scenes settlements. So its campaign at Envestnet stands out. It was clear from Impactive’s November 15 letter that the usually constructive activist had lost patience after a private request for board representation was ignored.

“Rather than accepting the help the company so desperately needs, management and the board proceeded to hire a series of ‘defense’ advisors, seemingly to entrench their own interests at the expense of shareholders,” Impactive wrote.

The activist warned that unless its managing partner Lauren Taylor Wolfe is appointed to Envestnet’s board it will nominate a slate of directors. Three of the company’s seven directors are expected to stand for re-election in 2023. One of them, Ross Chapin, joined the board more than two decades ago and is also a member of the compensation committee, likely making him a target.

Barrington at Matthews International
Demands: Refresh board, return cash, spin off assets.

Matthews International is a conglomerate offering everything from funeral and cremation services to factory automation equipment. Yet one thing it hasn’t produced is shareholder value, according to Barington Capital Group. In a December 13 presentation the activist lambasted current management for spending more than $1.3 billion on M&A without creating shareholder value and general underperformance during the current CEO’s tenure, which dates to 2006.

Signaling it was ready for a proxy contest, Barrington said it hopes to participate in refreshing the board. “There should only be one insider on the board and that’s the CEO, here they have three,” said Barrington’s Jim Mitarotonda said while speaking at the Bloomberg Activism Forum.

A report from Insightia’s Vulnerability module in July reported that “an activist could argue for at least one division to be spun off,” as well as noting the need for a board refresh and cost-cutting review.

More to watch

While the cases all involve current demands, there are others where no demands have yet been made but look likely to escalate.

In October, dedicated Starboard Value unveiled a new stake in Salesforce and argued the enterprise software maker could create “significant” value for shareholders through a “better balance” of growth and profitability. Since then Salesforce shares have slumped amid a series of senior executive departures, including co-CEO Bret Taylor and Stewart Butterfield, chief executive of subsidiary Slack Technologies.

Although Starboard’s stake in the $128 billion market cap company is less than 5%, it is unlikely Jeff Smith’s fund will remain silent for long in the face of such losses. Stay tuned.