Board of directors' responsiveness to shareholders: Evidence from shareholder proposals

Ertimur, Yonca; Ferri, Fabrizio; Stubben, Stephen

doi:10.1016/j.jcorpfin.2009.07.005

Cited by 303 publications

(235 citation statements)

References 60 publications

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“…Ertimur et al (2011) finds that the rate of implementation for compensation-related proposals is only 5 percent but increases to 32 percent when the proposal receives a majority vote, and documents that firms with excess CEO pay before being engaged decrease total CEO pay on average by 38 percent. Thomas and Cotter (2007) and Ertimur et al (2010) document that after 2002 boards have become significantly more responsive to shareholder proposals winning majority votes, resulting in directors being increasingly willing to remove important anti-takeover defenses, such as the classified board and poison pill, in response to shareholders' requests. However, despite the increase in support for shareholder proposals and board action in response, these studies find little evidence of any effect on firm value.…”

Section: Shareholder Activismmentioning

confidence: 99%

Shareholder Activism on Sustainability Issues

Grewal

Serafeim²,

Yoon³

2016

SSRN Journal

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Shareholder activism on sustainability issues has become increasingly prevalent over the years, with the number of proposals filed doubling from 1999 to 2013. We use recent innovations in accounting standard setting to classify 2,665 shareholder proposals that address environmental, social and governance (ESG) issues as financially material or immaterial, and we analyze how proposals on material versus immaterial issues affect firms' subsequent ESG performance and market valuation. We find that 58 percent of the shareholder proposals in our sample are filed on immaterial issues. We document that filing shareholder proposals is effective at improving the performance of the company on the focal ESG issue, even though such proposals nearly never received majority support. Improvements occur across both material and immaterial issues. Proposals on immaterial issues are associated with subsequent declines in firm valuation while proposals on material issues are associated with subsequent increases in firm value. We show that companies increase performance on immaterial issues because of agency problems, low awareness of the materiality of ESG issues, and attempts to divert attention from poor performance on material issues.

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Section: Shareholder Activismmentioning

confidence: 99%

Shareholder Activism on Sustainability Issues

Grewal

Serafeim²,

Yoon³

2016

SSRN Journal

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“…Wu (2004) finds that departing board members whose firms are publicly named as poorly governed by CalPER's corporate governance program, are less likely to take up future directorships. Ertimur, Ferri, and Stubben (2010) show that directors on boards that implement non-binding majority vote shareholder proposals that they initially opposed are significantly less likely to lose their board seat and other directorships.…”

Section: Literature Reviewmentioning

confidence: 96%

Sugar and Spice and Everything Nice: What are Good Directors Made of?

Nguyen

Rau

2012

SSRN Journal

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This paper analyzes the career paths followed by non-executive directors in a large sample of 40,585 unique directors associated with 5,246 unique US listed firms between 1999 and 2011. We document four types of characteristics that significantly influence the probability that a director will be successful in obtaining a second concurrent directorship. These include personal characteristics (belonging to large social networks, holding an MBA degree, having experience as a top executive in a large firm), macro-economic indicators (obtaining the first directorship in a recession, or after the passing of the Sarbanes-Oxley act of 2002), firm characteristics and firm performance (holding a directorship in large firms, firms with better valuations, or firms with higher return volatility) and firm reputation (announcing accounting restatements or being hit by class-action suits). Our paper documents characteristics of successful non-executive directors and sheds light on the determinants of their career paths.

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“…Thus, unions would utilize their influence to bargain for their members only. All else equal, proposals that are expected to receive high shareholder support would help unions to gain more power, since it is well known that management could be punished for not implementing those popular shareholder proposals, such as the majority vote proposals (Ertimur, et al, 2010).…”

Section: Proposals Withdrawn By Unionsmentioning

confidence: 99%

“…The evidence to date also suggests that support for shareholder proposals is higher at small and poorly performing companies and in firms with high institutional investor ownership but with low stakes held by insiders. In addition, Ertimur, et al (2010) show that management is more likely to adopt shareholder proposals with majority shareholder support, even though shareholder proposals are non-binding in nature. Indeed, proposals with majority shareholder support empower shareholders and therefore help discipline management, thus reducing agency costs.…”

Section: Introductionmentioning

confidence: 99%

An analysis of withdrawn shareholder proposals

Foley

Cebula

Jun³

et al. 2015

Corporate Governance

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This study visits the role of shareholder proposals in the governance of public corporations by studying withdrawn shareholder proposals. Among all shareholders, unions are the most likely to withdraw proposals. Furthermore, firms with a record of poor performance, lower insider ownership and more independent boards are likely to see proposals withdrawn. Since unions often possess a high level of bargaining power, we put emphasis on the behavior of unions. We find that unions resubmit proposals that have gained high shareholder support in the prior year. About fifty percent of those resubmitted proposals are withdrawn prior to the annual shareholder meetings. In addition, almost all of those proposals do not reappear in the following year, implying that the issues underlying those proposals have been settled. This phenomenon indicates that unions submit shareholder proposals strategically. Furthermore, it is more likely for unions to adopt this strategy when the prior voting support is higher, when the insider ownership is lower, and when the ownership is less dispersed. The identified strategy played by unions suggests that unions use shareholder proposals for union workers at the expense of shareholder value.

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Board of directors' responsiveness to shareholders: Evidence from shareholder proposals

Cited by 303 publications

References 60 publications

Shareholder Activism on Sustainability Issues

Shareholder Activism on Sustainability Issues

Sugar and Spice and Everything Nice: What are Good Directors Made of?

An analysis of withdrawn shareholder proposals

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