The Efficacy of Shareholder Voting in Staggered and Non-Staggered Boards: The Case of Audit Committee Elections
43 Pages Posted: 19 Oct 2014 Last revised: 4 Nov 2015
Date Written: October 31, 2015
We examine whether shareholder votes can influence the audit committee and whether this influence is uniform across non-staggered and staggered boards. We find that through voting, shareholders can increase the efficacy of the audit committee, leading to improvements in audit committee structure, diligence, and financial reporting quality. These results hold only in firms with non-staggered boards, underscoring the need to separately examine staggered and non-staggered boards. Importantly, the non-responsiveness of staggered audit committees to shareholder disapproval presents an additional explanation for the weaker performance that is often documented for firms with staggered boards. Overall, our results support the movement to de-stagger boards.
Keywords: Staggered Boards, Director Elections, Audit Committee, Proxy Advisors
JEL Classification: M41, G34
Suggested Citation: Suggested Citation