Board of Directors' Responsiveness to Shareholders: Evidence from Shareholder Proposals
50 Pages Posted: 20 Mar 2008 Last revised: 23 Sep 2012
Date Written: August 30, 2010
In recent years boards have become significantly more likely to implement nonbinding, majority-vote (MV) shareholder proposals. Using a sample of 620 MV proposals between 1997 and 2004, we find that shareholder pressure (e.g., the voting outcome and the influence of the proponent) and the type of proposals are the main determinants of the implementation decision, while traditional governance indicators do not seem to affect the decision. We then examine the labor market consequences of the implementation decision for outside directors and find that directors implementing MV shareholder proposals experience a one-fifth reduction in the likelihood of losing their board seat as well as other directorships.
Keywords: shareholder proposals, shareholder activism, director labor market
JEL Classification: G34
Suggested Citation: Suggested Citation