 |
An International Meeting of American Accounting
Association
|
Board of Directors' Responsiveness to Shareholders: Evidence from Majority-Approved Shareholder Proposals |
Yonca Ertimur
Stanford Graduate School of Business
Fabrizio Ferri
Harvard Business School
Stephen Stubben
Stanford Graduate School of Business
Abstract: In this paper we document the frequency of implementation of non-binding, majority-approved shareholder proposals and analyze the determinants of Boards’ decision to implement them. Using a sample of 317 majority-approved shareholder proposals between 2000 and 2004, we show that the frequency of implementation has increased over time and differs across types of proposals, with proposals to eliminate takeover defenses being less likely to be implemented. Also, we find that greater Board independence, the presence of a Governance Committee, higher shareholder rights and larger ownership by ‘dedicated’ institutional investors are associated with higher likelihood of implementation. Finally, proposals already presented in the past, those proposed by a larger shareholder and (more weakly) those receiving more support from shareholders are more likely to be implemented, while there is weak evidence of a negative association between recent stock performance and the implementation decision.