Inside Director Elections: Determinants and Consequences
University of Colorado at Boulder
Date: May 2, 2014
Time: 11:00 am - 12:30 pm
Location: Room 210
This paper provides an examination of the determinants and consequences of the voting outcomes at uncontested director elections. Similar to prior studies, we find that proxy advisors’ recommendations are a key determinant of the voting outcome. We then hand collect data from the proxy advisors’ report to document the rationale behind their negative recommendations, and, thus the factor considered by shareholders in casting their votes, and find that votes withheld from directors vary systematically with the reason behind the adverse vote, with board-level and committee-level issues triggering more negative votes than individual-level concerns. As for the economic consequences, similar to earlier studies, labor market consequences of high votes withheld are limited. We conjecture and find that this is because firms respond to shareholder dissatisfaction by addressing the underlying concerns (e.g. adopting the governance provision requested by shareholders, removing certain directors from key committees). Further, there is a $1.2 million reduction in CEO total pay following withhold recommendations that stem from pay-for-performance concerns.
For more information, please contact Karen Robertson at: karen.robertson [at] mcgill.ca.