Opportunistic Proposals by Union Shareholders

71 Pages Posted: 28 Sep 2015 Last revised: 8 Jul 2018

See all articles by John G. Matsusaka

John G. Matsusaka

University of Southern California - Marshall School of Business; USC Gould School of Law

Oguzhan Ozbas

University of Southern California - Marshall School of Business - Finance and Business Economics Department

Irene Yi

University of Toronto

Date Written: July 2018

Abstract

Shareholder proposals are increasingly important tools for corporate reformers, yet courts, policy makers, and scholars are concerned that proposals may be used "opportunistically" as bargaining chips by activists to extract side payments from management. This paper investigates whether labor unions use proposals opportunistically to influence contract negotiations. Our empirical strategy relies on the observation that proposals have higher bargaining-chip value in contract expiration years, when a new contract must be negotiated. We find that in contract expiration years compared to nonexpiration years, unions increase their proposal rate by one-fifth, particularly proposals concerning executive compensation, while nonunion shareholders do not increase their proposal rate in expiration years. Union proposals made during expiration years are less likely to be supported by other shareholders or a leading proxy advisor; the market reacts negatively to union proposals in expiration years; and withdrawn union proposals are accompanied with higher wage settlements.

Keywords: Corporate governance, shareholder proposals, unions, proxy access

JEL Classification: G30, K22, J51, G34, K31 J52

Suggested Citation

Matsusaka, John G. and Ozbas, Oguzhan and Yi, Irene, Opportunistic Proposals by Union Shareholders (July 2018). USC CLASS Research Paper No. CLASS15-25; Marshall School of Business Working Paper No. 17-3. Available at SSRN: https://ssrn.com/abstract=2666064 or http://dx.doi.org/10.2139/ssrn.2666064

John G. Matsusaka (Contact Author)

University of Southern California - Marshall School of Business ( email )

Department of Finance & Business Economics
Los Angeles, CA 90089
United States
213-740-6495 (Phone)
213-740-6650 (Fax)

USC Gould School of Law

699 Exposition Boulevard
Los Angeles, CA 90089
United States
213-740-6495 (Phone)

Oguzhan Ozbas

University of Southern California - Marshall School of Business - Finance and Business Economics Department ( email )

Marshall School of Business
Los Angeles, CA 90089
United States
213-740-0781 (Phone)
213-740-6650 (Fax)

Irene Yi

University of Toronto ( email )

Toronto
Canada

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