Shareholders proposals, vote outcome, and board composition

Abstract

This paper examines the variables that affect vote outcome in shareholder proposals. We found that sponsor identity, proposal type, and board composition play a significant role in determining vote outcome. Furthermore, we found that the interaction between the prior performance with board composition is significant and has a negative coefficient. We conducted nonparametric tests to investigate changes in board’s major characteristics before and after targeting. The results indicate that some changes in management and boards occur after shareholder proposals. These changes, however, are unrelated to variables that impact vote outcome. We conclude that shareholders proposals are not effective at changing company behavior or corporate governance.