Cyber democracy for better board representation? The effect of e-voting on excess control in an emerging economy

With a growth in shareholder activism, the influence of shareholders on the make-up and selection of board members is increasingly acknowledged but under-explored. Focusing on one element of activism, this article considers the adoption and use of electronic voting (e-voting) for board elections in emerging economies, testing its effect on the excess control of controlling shareholders. Using a sample of board elections at 809 publicly listed Taiwanese companies, results challenge convention on governance and shareholder democracy. We show that adopting e-voting counterintuitively leads to greater levels of excess control which subsequently harms firm performance—an effect more pronounced in firms characterized by a pyramidal control structure and family-controlled firms. Findings offer an alternative view on shareholder democracy, revisiting expectations of benefits accrued from e-voting. JEL Classification: M10, L21, L25

The Costs and Benefits of Shareholder Democracy: Gadflies and Low-Cost Activism

We show that there is cross-sectional variation in the quality of shareholder proposals. On average, proposals submitted by the most active individual sponsors are less likely to receive majority support, but they occasionally pass if shareholders mistakenly support them and may even be implemented due to directors’ career concerns. While gadfly proposals destroy shareholder value if they pass, shareholder proposals on average are value enhancing in firms with more informed shareholders. We conclude that more informed voting could increase the benefits associated with shareholder proposals.

The Annual General Meeting

The annual general meeting of a company has been an established part of the corporate landscape since the passing of the first Companies Act in 1862. The annual general meeting provides shareholders with the opportunity to consider the contents of the company’s annual financial statements, the reports of the directors and auditors, to choose the composition of the board of directors of the company, to appoint or re-appoint the auditors and to question the management about their conduct of the company’s affairs in the previous year. It is the forum at which the shareholders, in companies both large and small, have the opportunity to ‘have their say’. If the concept of shareholder democracy means anything, it is reflected in the obligation of companies to hold an annual general meeting for their shareholders. However, as will be discussed in this chapter, changes of fashion and the impact of modern practicalities have given rise to a new approach to the annual general meeting in recent years, with the result that such a meeting is in the UK only required as a matter of law for public companies and, since the introduction of the Company (Shareholders’ Rights) Regulations 2009, for private companies that