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

Abstract

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