scholarly journals Corporate Governance, Shareholder Proposals, and Engagement between Managers and Owners

2017 ◽  
Author(s):  
J. Robert Brown
2021 ◽  
Vol 9 (3) ◽  
pp. 45
Author(s):  
Pyung Kun Chu

Corporate social responsibility (CSR) is a topic which has recently been attracting an increasing amount of attention with respect to corporate operations, and shareholder proposals on CSR are also one of the main types of proposals at firms’ annual shareholder meetings. However, even though the frequency of CSR proposals at annual meetings is comparable to other types of shareholder proposals, the approval rate of CSR proposals is significantly lower than that of other types of proposals, meaning that most CSR proposals are not recommended by the annual meeting to the board of directors for further approval. Motivated by this stylized fact, this study investigates the value of the submission of CSR shareholder proposals. Using a regression discontinuity design with shareholder proposal data of US public companies between 2006 and 2019, this study examines the importance of shareholders’ interest in CSR for firm valuation. Interestingly, while the CSR proposals themselves are typically not approved, the submission of CSR proposals by shareholders at annual meetings matters for the value impact of other types of shareholder proposals. More specifically, the causal effect of approving a corporate governance proposal on shareholder value is significantly positive only if the corporate governance proposal is voted together with a CSR proposal at the same meeting, i.e., the presence of CSR proposals is important for firm value through its interrelations with corporate governance proposals. This shows that the submission of CSR shareholder proposals has significant value implications, even if the CSR proposals themselves are not approved at annual meetings.


2019 ◽  
Vol 18 (2) ◽  
pp. 178-197
Author(s):  
Ting Li ◽  
Xinlei Zhao ◽  
Aiwu Zhao

Purpose Motivated by managers’ intentions to pursue private interests by engaging in earnings management, this paper aims to investigate whether voting with hands (shareholders cast votes on shareholder proposals) by shareholders acts as an external disciplining mechanism over earnings management relative to corporate governance. Also, as corporate governance can scrutinize managers’ behavior, this study also examines whether there is a substitutive relation between shareholder proposals and corporate governance mechanism. Design/methodology/approach First, this paper uses ordinary least squares (OLS) regressions of discrepancy accruals on the percentage of “For” votes for shareholder proposals to test the incremental effect of shareholder proposals on earnings management. Second, firms receiving shareholder proposals are matched with those not receiving proposals by propensity scores, and the levels of earnings management and corporate governance between these two groups are compared by univariate analysis and OLS regressions. In addition, six portfolios are created based on whether firms receive shareholder proposals, as well as on the levels of corporate governance, to assess whether external control from shareholder proposals can substitute internal control for corporate governance in disciplining earnings management. Regressions of earnings management on corporate governance (shareholder proposals) are conducted in the sub-samples formed on shareholder proposals (corporate governance) to further explore the above substitution effects. Findings Based on a sample of 2,041 firm-year observations from 2001 to 2010, this paper finds that the “For” votes received from the shareholder proposals have a significant negative relationship with the practice of earnings management, even when corporate governance is controlled. The negative relationship between shareholder proposal and magnitude of earnings management is also found to be stronger when firms have weak corporate governance. The overall evidence suggests that the external control from “voting-with-hand” shareholders has a significant impact on earnings management. In addition, shareholder proposals can substitute the monitoring mechanism for corporate governance in constraining managers’ myopic behavior. Originality/value This paper contributes to the extant literature by using the percentage of “For” votes for shareholder proposals as a proxy for shareholder pressure and concerns. This study contributes to the earnings management literature by showing the disciplinary effect of outside shareholders on managers’ reporting behavior. Also, it contributes to the corporate governance research by presenting that shareholder proposals can substitute for the internal control of corporate governance in decreasing earnings management. This paper should be of interest to investors and standard setters.


2014 ◽  
Vol 12 (1) ◽  
pp. 742-758 ◽  
Author(s):  
Alexander H. Gnutti ◽  
John D. Martin ◽  
J. Douglas Ramsey

We analyze voting support for shareholder sponsored corporate governance proposals. Specifically, we study the impact of institutional share ownership, board structure, firm size, historical share performance, and proposal sponsor on the proportion of yes votes received. We use data from 253 shareholder proposals that came to a vote in 2013 for our analysis. Among our findings are the following: (1) pension funds sponsored 14 of the 20 proposals receiving the highest level of voting support while individuals and labor unions sponsored 16 of the 20 proposals receiving the lowest voting support; (2) firms with a classified board received higher proposal support than those without a classified board; (3) firms with a higher percentage of institutional ownership received greater voter support, and (4) firm size was inversely related to voting support


2018 ◽  
Vol 32 (8) ◽  
pp. 3183-3214 ◽  
Author(s):  
Laurent Bach ◽  
Daniel Metzger

Abstract We show that close votes on shareholder proposals are disproportionately more likely to be won by management than by shareholder activists. Using a sample of shareholder proposals from 2003 to 2016, we uncover a large and discontinuous drop in the density of voting results at the 50% threshold. We document similar patterns for say on pay votes and director elections. Our findings imply that shareholder influence through voting is limited by managerial opposition. It also follows that one cannot routinely use an RDD to identify the causal effects of changes in corporate governance generated by shareholder votes. Received May 29, 2017; editorial decision August 21, 2018 by Editor Itay Goldstein. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.


2008 ◽  
Vol 4 (2) ◽  
pp. 50-58
Author(s):  
Amani Khaled Bouresli ◽  
Wallace N. Davidson III

This paper examines the variables that affect vote outcome in shareholder proposals. We found that sponsor identity, proposal type, and board composition play a significant role in determining vote outcome. Furthermore, we found that the interaction between the prior performance with board composition is significant and has a negative coefficient. We conducted nonparametric tests to investigate changes in board’s major characteristics before and after targeting. The results indicate that some changes in management and boards occur after shareholder proposals. These changes, however, are unrelated to variables that impact vote outcome. We conclude that shareholders proposals are not effective at changing company behavior or corporate governance.


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