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Shareholder Voting in Proxy Contests for Corporate Control, Uncontested Director Elections and Management Proposals: A Review of the Empirical Literature

120 Pages Posted: 7 Nov 2017 Last revised: 14 Nov 2017

Randall S. Thomas

Vanderbilt University - Law School; European Corporate Governance Institute (ECGI)

Patrick C. Tricker

Independent

Date Written: November 6, 2017

Abstract

This paper surveys the empirical literature on shareholder voting, specifically on votes related to contested and uncontested director elections and on management proposals. While much of current theory depicts shareholder votes as an ineffective control on the board’s decision making, the empirical literature paints a more nuanced picture. When a proxy contest breaks out, shareholders wield immense influence. These contests tend to have significant benefits for the corporation, including facilitating a change in management, reducing unnecessary liquidity, and prompting the payout of dividends. Even in uncontested director elections, shareholders’ decisions to vote for or withhold their vote reflect the company’s performance. The decision to withhold has some albeit slight impact on improving corporate performance going forward.

Finally, the evidence suggests that shareholders seriously scrutinize management proposals, instead of blindly following management. ISS and institutional investors have led the charge in this area. For votes on mergers and acquisitions, shareholders do not block all bad acquisitions but do push the scales towards maximizing company value. For management compensation proposals, shareholders appear largely unconcerned with the company’s performance but deeply concerned with how the plan dilutes share value. Overall, shareholder voting plays a significant role in corporate management that deserves further research.

Keywords: corporate voting, proxy contests, management proposals, annual meeting

Suggested Citation

Thomas, Randall S. and Tricker, Patrick C., Shareholder Voting in Proxy Contests for Corporate Control, Uncontested Director Elections and Management Proposals: A Review of the Empirical Literature (November 6, 2017). Oklahoma Law Review, Vol. 70, No. 9; Vanderbilt Law Research Paper No. 17-53. Available at SSRN: https://ssrn.com/abstract=3066051

Randall Thomas (Contact Author)

Vanderbilt University - Law School ( email )

131 21st Avenue South
Nashville, TN 37203-1181
United States

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Patrick Tricker

Independent ( email )

No Address Available

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