Governance Changes through Shareholder Initiatives: The Case of Proxy Access
57 Pages Posted: 26 Jul 2015 Last revised: 21 Mar 2017
Date Written: January 17, 2017
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: Suggested Citation