It was a pivotal moment of activist investment when Phillips 66 shareholders made a split decision in May 2025 when they selected two Elliott Management candidates while retaining the two company's directors. The energy giant survived what the observers called the “barroom brawl” in the boardroom, and Elliott achieved something unprecedented. For Elliott, it was the first proxy vote for a US public company after more than 100 activist campaigns, proving that even the most skilled activists can face costly, uncertain battles. The Battle of Phillips 66 illustrates today's proxy landscape. There, activist campaigns continue at record levels, but businesses are increasingly willing to fight back effectively.
In an age where shareholder scrutiny is intensifying, shareholder activity is an increasing threat to many companies. In a recent board forum, Howard Brownstein, CEO of Brownstein Corporation and former board member P&F Industries and CEO of Am Castle and Pico Holdings. Pat Tucker, Head of M&A, Activism & Governance in FTI Consulting. Derekzava, a partner, co-chair, shareholder activity and corporate defense practice at Sidley Austin, has guided board members for interactive sessions through the anatomy of proxy fights, outlined key steps to preparing, responding and repealing under pressure, as needed.
1. Understand that behaviorism doesn't always mean conflict. Companies often align with activists' goals, even if they are approached with aggressive tactics. Zaba emphasized that measured ratings are essential. “Half the time, I shouldn't say half the time, but the number of activists appearing doesn't oppose them… Maybe the answer is going in the same direction so we need to get through this.” The board needs to separate the emotional response from the trustee's responsibility. Brownstein reminded participants, “We reminded them to avoid the tendency to automatically be biased towards what activists want to do. Everything could be a blind and great idea. Who knows?
2. Maintain management of shareholder communications. The uncoordinated board members' response to activist outreach can be at risk. Brownstein recommends formalizing the way communication is handled. “If you're on a board of directors of a company that's publicly available, as it's not all board members are talking to activists, that's not a bad idea.”
3. Don't rush to a reactive decision. As the nomination deadline approaches, pressure from activists often increases, but the board should resist rushing and being forced into movement. As Tucker warned, “The moves you're making with or without a CEO are read as meaningful signals as to where the board is heading.” Zaba said, “If the board thinks this is the person who should run a company, it's difficult to resolve… because 1% or 5% of shareholders think it's not the right answer.”
4. Always be prepared to engage. Preparation must be inherently aggressive. “The best work is done on sunny days,” Brownstein said. Tucker added, “You really need to know who your team is. Legal counsel, PR advisor, and you need to know who's got that first call.” He added, “It's easy for an activist to write a press release in one day. Sometimes you can put the company in a week. You really can't get that time.”
5. It's not necessarily a fair fight. Activists may present misleading or imperfect stories. Tucker emphasized asymmetry: “A big part of behaviorism is information asymmetry,” he said. “[The activist] I have a plan, I've probably worked on them for years and know where it's heading, but I don't tell them everything. ”
And finally, no matter what, focus on your business. The proxies fight requires caution, but Brownstein reminded the director of their core work: “There's a company that runs it,” he said. “Don't forget that your main job is to monitor the company.” Zaba agreed: “There is no silver bullet to win a proxy contest, but there is a silver bullet to lose it. That's to absolutely blow the quarter just before the vote.”
