The Costs and Benefits of Shareholder Democracy

53 Pages Posted: 18 Oct 2018 Last revised: 21 Nov 2019

See all articles by Nickolay Gantchev

Nickolay Gantchev

Southern Methodist University (SMU) - Finance Department; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Mariassunta Giannetti

Stockholm School of Economics; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Swedish House of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: November 15, 2019

Abstract

We study under what conditions the voting process weeds out harmful shareholder proposals. We show that there is cross-sectional variation in the quality of shareholder proposals. Some of the proposals submitted by the most active individual sponsors destroy shareholder value if supported by a majority of the votes cast and subsequently implemented. Bad proposals are less likely to obtain shareholder voting support in firms in which a larger fraction of shareholders collects information. These firms benefit from shareholder proposals, suggesting that the voting process should be reformed, but that shareholders’ ability to submit proposals should not necessarily be limited.

Keywords: Shareholder Activism; Shareholder Proposals; Shareholder Voting; Corporate Governance

JEL Classification: G3; D72

Suggested Citation

Gantchev, Nickolay and Giannetti, Mariassunta, The Costs and Benefits of Shareholder Democracy (November 15, 2019). European Corporate Governance Institute (ECGI) - Finance Working Paper No. 586/2018; Swedish House of Finance Research Paper No. 18-15; SMU Cox School of Business Research Paper No. 18-35. Available at SSRN: https://ssrn.com/abstract=3269378 or http://dx.doi.org/10.2139/ssrn.3269378

Nickolay Gantchev (Contact Author)

Southern Methodist University (SMU) - Finance Department ( email )

United States
214-768-4128 (Phone)

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

HOME PAGE: http://cepr.org

European Corporate Governance Institute (ECGI) ( email )

HOME PAGE: http://ecgi.global/users/nickolay-gantchev

Mariassunta Giannetti

Stockholm School of Economics ( email )

P.O. Box 6501
Sveavagen 65
SE-113 83 Stockholm
Sweden
+46 8 736 9607 (Phone)
+46 8 312 327 (Fax)

HOME PAGE: http://sites.google.com/site/mariassuntagiannetti/Home

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

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