Abstract

http://ssrn.com/abstract=2101453
 
 

References (39)



 


 



Outsourcing Shareholder Voting to Proxy Advisory Firms


David F. Larcker


Stanford University - Graduate School of Business

Allan L. McCall


Stanford University - Graduate School of Business

Gaizka Ormazabal


University of Navarra, IESE Business School

October 30, 2014

Rock Center for Corporate Governance at Stanford University Working Paper No. 119
Stanford University Graduate School of Business Research Paper No. 14-27 (2105R)

Abstract:     
This paper examines the economic consequences of institutional investors outsourcing research and voting decisions in public company elections to proxy advisory firms. We investigate the implications of these decisions in the context of shareholder say-on-pay voting required in 2011 under the Dodd-Frank Act. We find three primary results: proxy advisory firm recommendations have a substantive impact on say-on-pay voting outcomes; a substantial number of firms change their compensation programs in the time period before the formal shareholder vote in a manner consistent with the features known to be favored by proxy advisory firms in an effort to avoid a negative voting recommendation; and the stock market reaction to these compensation program changes is statistically negative. These results suggest that the outsourcing of voting to proxy advisory firms appears to have the unintended economic consequence that boards of directors are induced to make choices that decrease shareholder value.

Note: This paper has been retitled from "The Economic Consequences of Proxy Advisor Say-on-Pay Voting Policies" to "Outsourcing Shareholder Voting to Proxy Advisory Firms."

Number of Pages in PDF File: 51

Keywords: proxy advisory firms, say-on-pay, institutional shareholder voting

JEL Classification: G1; G3; K2; L5

working papers series





Download This Paper

Date posted: July 19, 2012 ; Last revised: November 4, 2014

Suggested Citation

Larcker, David F. and McCall, Allan L. and Ormazabal, Gaizka, Outsourcing Shareholder Voting to Proxy Advisory Firms (October 30, 2014). Rock Center for Corporate Governance at Stanford University Working Paper No. 119; Stanford University Graduate School of Business Research Paper No. 14-27 (2105R). Available at SSRN: http://ssrn.com/abstract=2101453 or http://dx.doi.org/10.2139/ssrn.2101453

Contact Information

David F. Larcker (Contact Author)
Stanford University - Graduate School of Business ( email )
Graduate School of Business
518 Memorial Way
Stanford, CA 94305-5015
United States
650-725-6159 (Phone)

Allan L. McCall
Stanford University - Graduate School of Business ( email )
Stanford, CA 94305
United States
Gaizka Ormazabal
University of Navarra, IESE Business School ( email )
Avenida Pearson 21
Barcelona, 08034
Spain
Feedback to SSRN


Paper statistics
Abstract Views: 5,798
Downloads: 1,195
Download Rank: 8,714
References:  39

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo2 in 0.328 seconds