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Managerial Accommodation, Proxy Access, and the Cost of Shareholder EmpowermentJohn G. MatsusakaUniversity of Southern California - Marshall School of Business; USC Gould School of Law Oguzhan OzbasUniversity of Southern California - Marshall School of Business - Finance and Business Economics Department February 2013 USC CLEO Research Paper Series No. C12-1 USC Legal Studies Research Paper Series No. 12-3 Marshall School of Business Working Paper No. FBE 02-12 AFA 2013 San Diego Meetings Paper Abstract: This paper develops a theory of corporate decision making to study the benefits and costs of shareholder empowerment. We show how permitting shareholders to propose directors or policies can cause value-maximizing managers to take value-reducing actions to accommodate activist investors with non-value-maximizing goals. The model identifies an important distinction between the right to approve and the right to propose. The right to approve is weak though always beneficial; the right to propose is impactful but can help as well as hurt shareholders. We identify implications for current policy discussions concerning director elections, proxy access, bylaw amendments, and shareholder voting.
Number of Pages in PDF File: 41 Accepted Paper SeriesDate posted: January 14, 2012 ; Last revised: February 16, 2013Suggested CitationContact Information
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