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Are uncontested director elections meaningful?
Paul E. Fischer, The Pennsylvania State University
Jeffrey D. Gramlich, University of Southern Maine and Copenhagen Business School
Brian P Miller, The Pennsylvania State University
ABSTRACT. We assess whether uncontested director election results reflect investor perceptions regarding board performance. Using a hand collected sample of over 10,000 votes from uncontested director elections, we show that (1) the vote outcome reflects investor perceptions regarding board performance; (2) the vote outcome predicts forced CEO turnover in the subsequent twelve months; and (3) the predictive content of the vote outcome is not subsumed by stock returns, return on assets, and change in institutional ownership. Even though uncontested director elections do not directly determine who sits on boards, our findings suggest that the elections are meaningful aggregators of investor perceptions and boards appear to be responsive to those perceptions.
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