Corporate Directors Learn From Environmental Shareholder Engagements

53 Pages Posted: 21 Jan 2022 Last revised: 22 Jan 2022

See all articles by Rob Bauer

Rob Bauer

Maastricht University; European Centre for Corporate Engagement (ECCE)

Jeroen Derwall

Maastricht University - European Centre for Corporate Engagement; Maastricht University - Department of Finance; Utrecht University - School of Economics

Colin Tissen

Maastricht University

Date Written: January 21, 2022

Abstract

We examine whether corporate directors learn from environmental engagements by studying the success and implementation of environmental shareholder proposals. We deem a proposal successful when the proposal sponsor withdrew it after negotiating with the target firm. Our results indicate that environmental proposals targeting firms at which directors have a stronger environmental knowledge base are more likely to be withdrawn. Next, using a difference-in-difference estimation with a matched control group, we show that the withdrawal of an environmental shareholder proposal leads to an improvement in the environmental performance of targeted firms. Most importantly, we find that a proposal withdrawal leads to an 8.6% increase in the environmental performance of non-targeted firms that are connected to the target firm through overlapping directorships. Since the engagement at the target firm is exogenous to the connected firm, we causally show that directors learn from engagements. Our results imply that environmental shareholder engagements improve corporate directors’ attention to and knowledge of environmental issues and that this improvement has effects on the firms they serve.

Keywords: board of directors, corporate environmental performance, shareholder engagement

JEL Classification: G34, M14, Q56

Suggested Citation

Bauer, Rob and Derwall, Jeroen and Derwall, Jeroen and Tissen, Colin, Corporate Directors Learn From Environmental Shareholder Engagements (January 21, 2022). Available at SSRN: https://ssrn.com/abstract=3981634 or http://dx.doi.org/10.2139/ssrn.3981634

Rob Bauer

Maastricht University ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands
+31 43 3883871 (Phone)

European Centre for Corporate Engagement (ECCE) ( email )

Tongersestraat 53
Maastricht, 6211LM
Netherlands

Jeroen Derwall

Maastricht University - European Centre for Corporate Engagement ( email )

FEBA
Tongersestraat 53
Maastricht, Limburg 6200MD
Netherlands

HOME PAGE: http://www.corporate-engagement.com/

Maastricht University - Department of Finance ( email )

Maastricht, 6200 MD
Netherlands

HOME PAGE: http://www.fdewb.unimaas.nl/finance/?page=member&id=175

Utrecht University - School of Economics ( email )

Kriekenpitplein 21-22
Adam Smith Building
Utrecht, +31 30 253 7373 3584 EC
Netherlands

Colin Tissen (Contact Author)

Maastricht University ( email )

Tongersestraat 53
Maastricht, Limburg 6211LM
Netherlands

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