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Governance Changes through Shareholder Initiatives: The Case of Proxy Access

57 Pages Posted: 26 Jul 2015 Last revised: 21 Mar 2017

Tara Bhandari

U. S. Securities and Exchange Commission

Peter Iliev

Pennsylvania State University - Department of Finance

Jonathan Kalodimos

Oregon State University - College of Business

Date Written: January 17, 2017

Abstract

A regulatory change permitting shareholder resolutions for proxy access generated a large wave of such proposals. Using a surprise SEC announcement to identify the substantial variation in the expected benefits of proxy access at different firms, we document that the extent to which the market reacts positively to a firm being targeted with a shareholder proposal for proxy access is strongly related to these expected benefits. However, we find that proponents are just as likely to target the firms that were not expected to benefit from proxy access as those that would benefit the most. We also find that management resists proposals more intensely at firms that stand to benefit more, and that coordination problems and conflicting shareholder interests confound the process of voting for the proposals. Hence, this primary channel for market-driven governance reform faces key limitations.

Keywords: Shareholder Proposals, Proxy Access, Private Ordering, Corporate Governance, Activism, Regulation

JEL Classification: G34,G38,K22

Suggested Citation

Bhandari, Tara and Iliev, Peter and Kalodimos, Jonathan, Governance Changes through Shareholder Initiatives: The Case of Proxy Access (January 17, 2017). Fourth Annual Conference on Financial Market Regulation. Available at SSRN: https://ssrn.com/abstract=2635695 or http://dx.doi.org/10.2139/ssrn.2635695

Tara Bhandari (Contact Author)

U. S. Securities and Exchange Commission ( email )

100 F Street NE
Washington, DC 20549
United States

Peter Iliev

Pennsylvania State University - Department of Finance ( email )

348 Business Building
University Park, PA 16802
United States

Jonathan Kalodimos

Oregon State University - College of Business ( email )

Corvallis, OR 97331
United States

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