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We examine how an investor collective action organization (ICAO) enhances activism by institutional investors. The ICAO initiated a new form of engagement—private meetings with independent directors to discuss governance proposals. Compared with a single investor acting alone, the ICAO has stronger incentives to engage in activism. Its dollar holdings and voting power are six times larger and predict direct access to the board and the firms it engages. Firms engaged by the ICAO are at least 58% more likely than non-engaged firms to adopt the ICAO’s governance proposals that include adoption of majority voting, say-on-pay, and specific compensation policies. Engaged firms also increase CEO incentive pay. An event study around the announcement of the ICAO’s formation shows a positive impact on value that increases in both dollar holdings and voting power. We conclude that institutional investors improve governance outcomes through collective action.

How do firms choose performance peer groups used in chief executive officer (CEO) relative performance evaluation contracts? We find that while firms, for the most part, choose performance peers to better identify their CEOs' impact on firm performance, they also tend to select underperforming peers. Dynamically, we find that peers that are added and retained every year are weaker than ones that were not chosen. These findings suggest managers may have some influence on the choice of performance peers. Finally, using a quasi-natural experiment, we find that enhanced disclosure did not affect the tendency of firms to select underperforming peers.