Do Boards Pay Attention When Institutional Investor Activists 'Just Vote No'?

50 Pages Posted: 12 Aug 2004 Last revised: 14 Jan 2013

See all articles by Diane Del Guercio

Diane Del Guercio

University of Oregon, Lundquist College of Business; European Corporate Governance Institute (ECGI)

Laura Seery Cole

University of Tennessee, Knoxville

Tracie Woidtke

University of Tennessee, Haslam College of Business

Date Written: January 1, 2008

Abstract

We examine 'just vote no' campaigns, a recent innovation in low-cost shareholder activist tools whereby activists encourage their fellow shareholders to withhold votes toward a director's election to express dissatisfaction with management performance or the firm's corporate governance structure. Grundfest (1993) argues that a substantial withheld vote will motivate directors to take immediate action to avoid further embarrassment. We find a variety of supportive evidence, including operating performance improvements and abnormal disciplinary CEO turnover, indicating that campaigns induce boards to take actions in shareholders' interests. Furthermore, abnormal turnover is robust to controlling for concurrent events and firm- and CEO-specific controls.

Keywords: CEO turnover, shareholder activism, director elections, public pension funds

JEL Classification: G23, G34, G30

Suggested Citation

Del Guercio, Diane and Cole, Laura S. and Woidtke, Tracie, Do Boards Pay Attention When Institutional Investor Activists 'Just Vote No'? (January 1, 2008). Journal of Financial Economics (JFE), vol 90, 84-103.. Available at SSRN: https://ssrn.com/abstract=575242 or http://dx.doi.org/10.2139/ssrn.575242

Diane Del Guercio (Contact Author)

University of Oregon, Lundquist College of Business ( email )

Lundquist College of Business
1208 University of Oregon
Eugene, OR 97403
United States
541-346-5179 (Phone)
541-346-3341 (Fax)

European Corporate Governance Institute (ECGI) ( email )

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

Laura S. Cole

University of Tennessee, Knoxville ( email )

425 Stokely Management Center
Knoxville, TN 37996
United States

Tracie Woidtke

University of Tennessee, Haslam College of Business ( email )

428 Stokely Management Center
Knoxville, TN Tennessee 37996-0540
United States
865-974-1718 (Phone)
865-974-1716 (Fax)

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