Majority Voting for the Election of Directors

52 Pages Posted: 15 Feb 2007 Last revised: 3 Feb 2008

See all articles by William K. Sjostrom

William K. Sjostrom

University of Arizona - James E. Rogers College of Law

Young Sang Kim

Northern Kentucky University - Haile/US Bank College of Business

Date Written: February 24, 2007

Abstract

We explore the theory, law, and practice of the shift by public companies from a plurality voting standard for the election of directors to a majority voting standard, an emerging governance reform sweeping corporate America. Although not mandated by law, as of October 2006, more than 250 public companies, including at least 36% of S&P 500 companies and 31% of Fortune 500 companies, had implemented some form of majority voting. After analyzing the forms of majority voting implemented by these companies, we conclude that majority voting, as put into action, is little more than smoke and mirrors. We then report our findings from an event study we undertook to test our "smoke and mirrors" hypothesis. Specifically, we examined stock price movements of firms around announcements that they have or will adopt some form of majority voting. Consistent with our hypothesis, we found no statistically significant market reaction.

Keywords: majority voting, majority vote, director elections, board elections, plurality voting, plurality plus

JEL Classification: G3, G34, K2, K22

Suggested Citation

Sjostrom, William K. and Kim, Young Sang, Majority Voting for the Election of Directors (February 24, 2007). Connecticut Law Review, Vol. 40, No. 2, December 2007. Available at SSRN: https://ssrn.com/abstract=962784 or http://dx.doi.org/10.2139/ssrn.962784

William K. Sjostrom (Contact Author)

University of Arizona - James E. Rogers College of Law ( email )

P.O. Box 210176
Tucson, AZ 85721-0176
United States

Young Sang Kim

Northern Kentucky University - Haile/US Bank College of Business ( email )

Dept of Economics and Finance
Highland Heights, KY 41099
United States
859-572-5160 (Phone)
859-572-6627 (Fax)

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