A Paper Tiger? An Empirical Analysis of Majority Voting

48 Pages Posted: 18 Apr 2010 Last revised: 14 Oct 2013

See all articles by Jie Cai

Jie Cai

Drexel University

Jacqueline L. Garner

Georgia Institute of Technology - Scheller College of Business

Ralph A. Walkling

Drexel University - Lebow College of Business

Date Written: December 16, 2012

Abstract

Majority voting in board elections has emerged as a dominant theme in recent proxy seasons. Analysis of majority voting is important: first, the impact is controversial yet scant empirical evidence exists. Second, Congress is still considering mandating this practice. Third, there has been a tectonic shift in adoptions of majority voting, from 16% to over 67% of S&P 500 firms in just two years. Fourth, the vast majority of shareholder proposals for majority voting are sponsored by unions with little shareholdings. Proponents argue that majority voting aligns shareholder-director interests. Opponents argue that the practice will be disruptive and could result in the failure of boards to meet exchange and SEC requirements. Others assert that majority voting is a paper tiger, amounting to form over substance, particularly since many adoptions are non-binding. We provide an empirical analysis of the wealth effects, characteristics, and efficacy of majority voting. Our results are consistent with the paper tiger hypothesis.

Keywords: Election of Directors, Majority Voting, Shareholder Proposals

JEL Classification: G34, G18

Suggested Citation

Cai, Jie and Garner, Jacqueline L. and Walkling, Ralph August, A Paper Tiger? An Empirical Analysis of Majority Voting (December 16, 2012). Journal of Corporate Finance, Vol. 21, 2013. Available at SSRN: https://ssrn.com/abstract=1491627 or http://dx.doi.org/10.2139/ssrn.1491627

Jie Cai (Contact Author)

Drexel University ( email )

LeBow College of Business
Philadelphia, PA 19104
United States
215-895-1755 (Phone)
215-895-2955 (Fax)

HOME PAGE: http://faculty.lebow.drexel.edu/CaiJ/

Jacqueline L. Garner

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States

Ralph August Walkling

Drexel University - Lebow College of Business ( email )

LeBow College of Business
Philadelphia, PA 19104
United States
(215) 895-4920 (Phone)
(215) 895-6119 (Fax)

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