Harley-Davidson's Governance Crossroads: Navigating Legal Headwinds and Fiduciary Risks to Secure Long-Term Value

In the realm of corporate governance, few issues strike as directly at shareholder value as allegations of fiduciary duty breaches. For Harley-Davidson (NYSE: HOG), 2025 has become a year of reckoning, as ongoing legal investigations, shareholder lawsuits, and a bruising proxy battle expose vulnerabilities that could redefine the iconic motorcycle maker's trajectory. As investors weigh the risks and rewards of holding Harley stock, a critical evaluation of governance flaws and their implications is imperative.

The Legal Storm: SEC Probe and Shareholder Lawsuits

At the heart of the current scrutiny is an SEC investigation into Harley's financial disclosures, triggered by lawsuits accusing the company of misleading investors about its production targets and financial health. In April 2025, Harley revised its annual motorcycle shipment target downward by 10,000 units, a move that shareholder plaintiffs argue reflects “materially false and misleading” statements about its operational capabilities. The lawsuits, including one filed by Murray, Frank & Sailer LLP, allege “channel stuffing”—a practice where companies artificially inflate sales by pushing inventory onto dealers—raising red flags about accounting integrity.

Harley has denied these claims, asserting the lawsuits “are without merit” and emphasizing its cooperation with regulators. Yet the SEC's involvement itself signals heightened scrutiny. shows volatility, with shares down nearly 15% since early 2025—a reflection of investor anxiety over the legal cloud.

The Proxy Battle: A Test of Governance

The governance crisis deepened with a high-stakes proxy battle led by activist investor H Partners, which accused Harley's board of mismanagement and poor CEO succession planning. H Partners sought to replace three directors, including outgoing CEO Jochen Zeitz, arguing that the board's focus on electric vehicle subsidiary LiveWire distracted from core markets. Harley countered that H Partners' campaign was “disruptive” and “disingenuous,” citing strong financial metrics: a 13% operating margin (2022–2024), 70% free cash flow relative to EBITDA, and total shareholder returns outperforming peers by ~10 percentage points under Zeitz.

The May 14 shareholder vote resolved the proxy battle in Harley's favor, with all director nominees elected. However, the battle exposed divisions within the shareholder base, particularly over strategic priorities. Critics argue that the board's resistance to H Partners' input—a group that had held a 1.7% stake—suggests an overly insulated governance structure, raising concerns about accountability.

Fiduciary Risks and Shareholder Value: What's at Stake?

The legal and governance challenges threaten more than just Harley's reputation. Key risks include:
1. Litigation Costs: Legal fees and potential settlements could strain margins, especially as Harley faces declining revenues. reveals a widening gap between ambitious targets and reality, which may fuel further lawsuits.
2. Investor Confidence: Prolonged uncertainty could deter institutional investors, exacerbating volatility in HOG's stock.
3. Strategic Distraction: Management's focus on defending governance flaws may divert attention from executing its Hardwire strategic plan, which hinges on doubling LiveWire investments and expanding global markets.

Due Diligence Steps for Shareholders

Investors must rigorously assess Harley's governance and legal risks:
- Review SEC Filings: Study the company's 10-K and 10-Q reports for details on the SEC investigation and financial adjustments.
- Analyze Proxy Materials: Evaluate the board's responsiveness to shareholder concerns, including the May 14 vote results and ISS's recommendation to support management.
- Monitor Legal Updates: Track developments in the shareholder lawsuits and SEC probe, as outcomes could shift the risk-reward calculus.

Strategic Actions to Mitigate Risk

1. Demand Transparency: Urge Harley to proactively disclose findings from the SEC investigation and governance reforms.
2. Diversify Exposure: Consider reducing HOG's weighting in portfolios until governance stability is restored.
3. Engage with Activists: Evaluate H Partners' criticisms objectively—while their tactics were contentious, their focus on operational rigor may hold merit.

Conclusion: A Crossroads for Value Creation

Harley-Davidson's legacy and strategic moves like LiveWire's electric push still hold promise. However, its governance flaws and legal battles introduce material risks that could cap long-term value. Investors must balance the brand's enduring appeal with the urgent need for accountability. For now, caution is warranted: engage in thorough due diligence, advocate for transparency, and remain vigilant for signs of governance reform. The road ahead is fraught with potholes, but a decisive turn toward stronger oversight could still lead Harley back to full-throttle growth.