How does the market view shareholder proposals?

Abstract

I examine a decision made by a corporate vote tabulating firm that removed the ability of proposal sponsors to obtain interim vote tally data in exempt solicitation campaigns. The decision by the firm reduced the probability of the implementation of shareholder proposals and I use it to infer whether the market views shareholder proposals as value increasing. I find that the market’s overall reaction to the decision was positive and the market’s reaction was more positive for certain proposals and proposals from certain sponsors. The results suggest that some shareholder proposals are not viewed as value increasing by the market and indicate that it is important to understand how shareholders get involved in corporate affairs to correctly gauge the benefits and costs of shareholder proposals.

Keywords: shareholder proposals, shareholder rights, governance

JEL Classification: G34