Governance Changes through Shareholder Initiatives: The Case of Proxy Access

Abstract

We study a regulatory change that permitted shareholder proposals to instate proxy access. It generated over 300 proposals and led more than 250 firms to adopt proxy access from 2012 to 2016. The firms expected to benefit most from proxy access have the most positive market reaction to receiving a proposal. However, proposals and adoptions are not concentrated at these firms, instead being common at large, well-governed firms. We provide evidence of the tactics used by management to resist proxy access at firms that stand to benefit, and demonstrate that shareholders oppose proxy access more where they have large holdings.

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

JEL Classification: G34,G38,K22