Nonbinding Voting for Shareholder Proposals

Shareholder proposals are a common form of shareholder activism. Voting for shareholder proposals, however, is nonbinding since management has the authority to reject the proposal even if it received majority support from shareholders. We analyze whether nonbinding voting is an effective mechanism f...

Full description

Saved in:
Bibliographic Details
Published in:The Journal of finance (New York) 2011-10, Vol.66 (5), p.1579-1614
Main Authors: LEVIT, DORON, MALENKO, NADYA
Format: Article
Language:English
Subjects:
Business management
Business organization
Business structures
Business studies
Cogs
Conflicts of interest
Corporate planning
Financial management
Internet
Investors
Majority voting
Organizational analysis
Organizational structure
Proposals
Proxy fights
Shareholder activism
Shareholder voting
Shareholders
Stockholders
Studies
Voting
Voting behaviour
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:Shareholder proposals are a common form of shareholder activism. Voting for shareholder proposals, however, is nonbinding since management has the authority to reject the proposal even if it received majority support from shareholders. We analyze whether nonbinding voting is an effective mechanism for conveying shareholder expectations.We show that, unlike binding voting, nonbinding voting generally fails to convey shareholder views when manager and shareholder interests are not aligned. Surprisingly, the presence of an activist investor who can discipline the manager may enhance the advisory role of nonbinding voting only if conflicts of interest between shareholders and the activist are substantial.
ISSN:0022-1082
1540-6261
DOI:10.1111/j.1540-6261.2011.01682.x