Electing Directors

Abstract:     
Using a large sample of director elections, we document that shareholder votes are
significantly related to firm performance, governance, director performance, and voting
mechanisms. However, most variables, except meeting attendance and ISS
recommendation, have little economic impact on shareholder votes. Even poorly
performing directors and firms typically receive over 90% of votes cast. Nevertheless,
fewer votes lead to lower 'abnormal' CEO compensation and a higher probability of
removing poison pills, classified boards, and CEOs. Meanwhile, director votes have little
impact on election outcomes, firm performance, or director reputation. These results
provide important benchmarks for the current debate about election reforms.

Number of Pages in PDF File: 76

Keywords: Board of directors, election of directors

JEL Classification: G34

Accepted Paper Series