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Board of Directors' Responsiveness to Shareholders: Evidence from Shareholder Proposals

50 Pages Posted: 20 Mar 2008 Last revised: 23 Sep 2012

Yonca Ertimur

University of Colorado at Boulder - Department of Accounting

Fabrizio Ferri

Columbia Business School - Accounting, Business Law & Taxation

Stephen Stubben

University of Utah

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Date Written: August 30, 2010

Abstract

In recent years boards have become significantly more likely to implement nonbinding, majority-vote (MV) shareholder proposals. Using a sample of 620 MV proposals between 1997 and 2004, we find that shareholder pressure (e.g., the voting outcome and the influence of the proponent) and the type of proposals are the main determinants of the implementation decision, while traditional governance indicators do not seem to affect the decision. We then examine the labor market consequences of the implementation decision for outside directors and find that directors implementing MV shareholder proposals experience a one-fifth reduction in the likelihood of losing their board seat as well as other directorships.

Keywords: shareholder proposals, shareholder activism, director labor market

JEL Classification: G34

Suggested Citation

Ertimur, Yonca and Ferri, Fabrizio and Stubben, Stephen, Board of Directors' Responsiveness to Shareholders: Evidence from Shareholder Proposals (August 30, 2010). Journal of Corporate Finance, Vol. 16, pp. 53-72, 2010. Available at SSRN: https://ssrn.com/abstract=1106375 or http://dx.doi.org/10.2139/ssrn.1106375

Yonca Ertimur (Contact Author)

University of Colorado at Boulder - Department of Accounting ( email )

419 UCB
Boulder, CO 80309-0419
United States

Fabrizio Ferri

Columbia Business School - Accounting, Business Law & Taxation ( email )

3022 Broadway
New York, NY 10027
United States

Stephen Stubben

University of Utah ( email )

1655 E. Campus Center
Salt Lake City, UT 84112
United States

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