Can Strong Corporate Governance Selectively Mitigate the Negative Influence of 'Special Interest' Shareholder Activists? Evidence from the Labor Market for Directors

65 Pages Posted: 13 Jun 2014 Last revised: 2 Jul 2018

See all articles by Diane Del Guercio

Diane Del Guercio

University of Oregon, Lundquist College of Business; European Corporate Governance Institute (ECGI)

Tracie Woidtke

University of Tennessee, Haslam College of Business

Date Written: June 21, 2018

Abstract

Union and public pension funds, the most prolific institutional activists employing low-cost targeting methods, are often accused of pursuing private benefits. Extant literature finds that unions representing workers, as stakeholders, are not aligned with shareholders. Limiting shareholder power may mitigate “special interest” activism but can also exacerbate managerial agency problems. We examine the director labor market in two different settings, majority approved and withdrawn shareholder proposals, where conflicted activists arguably have additional leverage over management, and find evidence that corporate governance can selectively mitigate the negative influence that conflicted activists have over firms without stifling all influence of low-cost activists.

Keywords: shareholder activism, market for directors, public pension funds, labor unions

JEL Classification: G34

Suggested Citation

Del Guercio, Diane and Woidtke, Tracie, Can Strong Corporate Governance Selectively Mitigate the Negative Influence of 'Special Interest' Shareholder Activists? Evidence from the Labor Market for Directors (June 21, 2018). European Corporate Governance Institute (ECGI) - Finance Working Paper No. 508/2017. Available at SSRN: https://ssrn.com/abstract=2448920 or http://dx.doi.org/10.2139/ssrn.2448920

Diane Del Guercio (Contact Author)

University of Oregon, Lundquist College of Business ( email )

Lundquist College of Business
1208 University of Oregon
Eugene, OR 97403
United States
541-346-5179 (Phone)
541-346-3341 (Fax)

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Tracie Woidtke

University of Tennessee, Haslam College of Business ( email )

428 Stokely Management Center
Knoxville, TN Tennessee 37996-0540
United States
865-974-1718 (Phone)
865-974-1716 (Fax)

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