Elliott Management's Strategic Pressure on Texas Private Equity: A Governance Revolution in the Making

In the ever-evolving landscape of corporate governance, Elliott Management has emerged as a formidable force, leveraging its activist investing playbook to reshape the strategies of Texas-based private equity firms and public corporations alike. The hedge fund's recent campaigns-targeting entities like Phillips 66 and Stronghold Investment Management-underscore a broader trend: the weaponization of governance reforms to unlock shareholder value. As Texas legislators simultaneously recalibrate the state's corporate governance framework, the interplay between activist tactics and legal reforms is creating a volatile yet transformative environment for businesses.

Elliott's Playbook: From Boardroom Battles to Fee Scrutiny

Elliott's 2025 proxy campaign against Phillips 66 exemplifies its signature approach. By nominating seven directors to the energy giant's board, the firm seeks to reduce board size to 12 members and enforce annual elections, aiming to streamline decision-making and focus on refining operations over midstream assets, as reported in a Nasdaq article. This "Streamline 66" strategy mirrors Elliott's past successes, such as its 2024 campaign at Marathon Petroleum, where it pushed for similar operational restructurings. Phillips 66, however, has resisted, defending its integrated business model and countering with its own slate of directors. The clash highlights a critical tension: activist investors often prioritize short-term value extraction, while management may argue for long-term strategic coherence.

Beyond public markets, Elliott has turned its attention to private equity. In a high-stakes legal battle, the firm is challenging Stronghold Investment Management's fee structure, alleging excessive expenses for managing a $100 million oil and gas portfolio, according to a Bloomberg Law article. By demanding internal records, Elliott aims to expose what it claims are opaque financial practices-a move that aligns with its broader strategy of holding private equity firms to public company accountability standards, as noted in a ZenergyCom analysis. This case is emblematic of a growing trend: activists are no longer confined to public equity markets but are increasingly scrutinizing private capital flows, particularly in Texas, a hub for energy and private equity activity.

Texas's Legislative Shift: A New Frontier for Governance

The Texas corporate governance landscape has been reshaped by Senate Bill 29 (SB 29), enacted in May 2025. This legislation codifies the business judgment rule, presuming directors act in good faith unless proven otherwise, and introduces a 3% ownership threshold for shareholders to initiate derivative lawsuits, as outlined in a JurisReview summary. These reforms, championed by Governor Greg Abbott, aim to reduce litigation risks and attract corporations to Texas by offering legal predictability, according to a Baker Botts analysis. For activists, however, SB 29's restrictions on shareholder litigation and inspection rights could dampen their ability to leverage legal pressure against management.

Critics argue that SB 29 tilts the balance of power toward corporate leaders, potentially eroding accountability for minority shareholders, as discussed in a WFAA article. Yet, supporters contend that the law fosters a pro-business environment, enabling companies to pursue bold strategies without fear of frivolous lawsuits. This legislative shift intersects with Elliott's activism in a critical way: while the hedge fund's campaigns rely on shareholder voting power and legal leverage, Texas's new rules may limit the avenues through which activists can challenge management.

Broader Trends: Governance Over ESG, and the Rise of Data-Driven Activism

Nationwide, shareholder activism in 2025 has pivoted sharply toward governance and executive compensation, with 48% of campaigns citing compensation concerns, according to the Bloomberg Law article cited above. Elliott's focus on board refreshment and fee transparency aligns with this trend. For instance, its successful 2024 campaign at Southwest Airlines-resulting in a board overhaul and revenue-raising measures-demonstrates how activists can leverage governance reforms to drive financial performance; that campaign was covered in the WFAA article referenced earlier.

Meanwhile, Texas-specific campaigns are increasingly data-driven. Activists are using AI and analytics to identify governance vulnerabilities, such as excessive executive pay or underperforming assets, a pattern noted in the ZenergyCom analysis cited above. Elliott's legal battle with Stronghold, for example, hinges on forensic analysis of expense records-a tactic that underscores the growing importance of data in modern activism.

Implications for Investors and Corporations

For investors, Elliott's campaigns highlight the value of proactive governance. Companies that resist activist pressure without clear strategic justifications risk eroding shareholder trust. Conversely, those that engage with activists-like Phillips 66's inclusion of Bob Pease, a former Elliott ally, in its director slate-may find middle-ground solutions, as discussed in the Bloomberg Law coverage.

For corporations, the Texas legal landscape demands a dual strategy: compliance with SB 29's protections while anticipating activist tactics. Boards must balance the benefits of reduced litigation risks with the need to maintain transparency. As one governance expert notes, "Texas is becoming a battleground for the future of corporate accountability-where legal reforms and activist ingenuity collide."

Conclusion

Elliott Management's strategic pressure on Texas private equity firms and public companies reflects a broader shift in corporate governance: the fusion of activist investing with legislative innovation. As Texas redefines its corporate legal framework, the interplay between activist tactics and state-level reforms will shape the future of accountability, shareholder rights, and value creation. For investors, the lesson is clear: governance is no longer a passive concern-it is a dynamic, contested arena where the stakes are higher than ever.