Document Type
Article
Publication Title
Journal of Corporate Finance
Publication Date
6-2007
ISSN
0749-5587
Page Number
368
Keywords
corporate governance, shareholder proposals, agency costs
Disciplines
Business Organizations Law | Law
Abstract
Although the owners of publicly traded companies have had the right to offer shareholder proposals using Rule 14a-8 for several decades, the effectiveness of the rule has been frequently questioned because few of these proposals received substantial support from other shareholders and even fewer have been implemented by boards. Using new data from the 2002–2004 proxy seasons, we analyze shareholder voting patterns on these proposals, board reactions to them, and market responses. We find some big changes from earlier periods: many more proposals are receiving majority shareholder support during our sample period relative to earlier studies, and this support has translated into directors implementing more of the actions called for by shareholders. In particular, boards are increasingly willing to remove important anti-takeover defenses, such as the classified board and poison pill, in response to shareholders' requests, something rarely seen in the past. Despite the increase in support for shareholder proposals and board action in response, we find small and insignificant stock market reaction. We conclude that shareholder proposals under Rule 14a-8 have an emerging role in reducing agency costs by increasing director responsiveness to shareholder concerns to open the market more fully to corporate control.
Recommended Citation
Randall S. Thomas and James Cotter,
Shareholder Proposals in the New Millennium: Shareholder Support, Board Response, and Market Reactions, 13 Journal of Corporate Finance. 368
(2007)
Available at: https://scholarship.law.vanderbilt.edu/faculty-publications/1475