Board of directors' responsiveness to shareholders: Evidence from shareholder proposals |
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Authors: | Yonca Ertimur Fabrizio Ferri Stephen R Stubben |
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Institution: | 1. Department of Finance, University of Melbourne, Melbourne, Australia;2. Department of Finance, Norwegian School of Economics, Bergen, Norway;3. Department of Finance, Erasmus School of Economics, Rotterdam, The Netherlands |
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Abstract: | In recent years boards have become significantly more likely to implement non-binding, majority-vote (MV) shareholder proposals. Using a sample of 620 MV proposals between 1997 and 2004, we find that shareholder pressure (e.g., the voting outcome and the influence of the proponent) and the type of proposals are the main determinants of the implementation decision, while traditional governance indicators do not seem to affect the decision. We then examine the labor market consequences of the implementation decision for outside directors and find that directors implementing MV shareholder proposals experience a one-fifth reduction in the likelihood of losing their board seat as well as other directorships. |
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