The Power of Shareholder Votes: Evidence from Uncontested Director Elections
Robert H. Smith School Research Paper No. RHS 2609532
Georgetown McDonough School of Business Research Paper No. 2609532
52 Pages Posted: 23 May 2015 Last revised: 24 Mar 2017
Date Written: March 22, 2016
Abstract
This paper asks the question whether dissent votes in uncontested director elections have consequences for directors. We show that, contrary to popular belief based on prior studies, shareholder votes have power and result in negative consequences for directors. Directors facing dissent are more likely to depart boards, especially if they are not lead directors or chairs of important committees. Directors facing dissent who do not leave are moved to less prominent positions on boards. Finally, we find evidence that directors facing dissent face reduced opportunities in the market for directors. We also find that the effects of dissent votes go beyond those of proxy advisor recommendations.
Keywords: director elections; director reputation; shareholder voting; proxy advisor
JEL Classification: G3, G32, G34, K22, L51
Suggested Citation: Suggested Citation
Reena Aggarwal (Contact Author)
Georgetown University - Robert Emmett McDonough School of Business ( email )
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Sandeep Dahiya
Georgetown University - Department of Finance ( email )
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Nagpurnanand Prabhala
The Johns Hopkins Carey Business School ( email )
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