Abstract

http://ssrn.com/abstract=1325504
 
 

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Nonbinding Voting for Shareholder Proposals


Doron Levit


University of Pennsylvania - Finance Department

Nadya Malenko


Boston College - Carroll School of Management

October 1, 2011

Journal of Finance, October 2011
Rock Center for Corporate Governance Working Paper No. 37

Abstract:     
Shareholder proposals are a common form of shareholder activism. Voting for shareholder proposals, however, is nonbinding since management has the authority to reject the proposal even if it received majority support from shareholders. We analyze whether nonbinding voting is an effective mechanism for conveying shareholder expectations. We show that, unlike binding voting, nonbinding voting generally fails to convey shareholder views when manager and shareholder interests are not aligned. Surprisingly, the presence of an activist investor who can discipline the manager may enhance the advisory role of nonbinding voting only if conflicts of interest between shareholders and the activist are substantial.

Number of Pages in PDF File: 44

Keywords: Shareholder voting, shareholder proposals, non-binding proposals, precatory resolutions, advisory vote, strategic voting, majority rule, information aggregation, proxy fight, shareholder activism

JEL Classification: D72, D74, D82, D83, G34, K22

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Date posted: January 12, 2009 ; Last revised: June 13, 2012

Suggested Citation

Levit, Doron and Malenko, Nadya, Nonbinding Voting for Shareholder Proposals (October 1, 2011). Journal of Finance, October 2011; Rock Center for Corporate Governance Working Paper No. 37. Available at SSRN: http://ssrn.com/abstract=1325504

Contact Information

Doron Levit (Contact Author)
University of Pennsylvania - Finance Department ( email )
The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States

Nadya Malenko
Boston College - Carroll School of Management ( email )
140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States
HOME PAGE: http://www2.bc.edu/nadya-malenko/
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