A Report on Corporate Governance and Shareholder Activism

In the last two decades, shareholders have gained power relative to corporate boards. One way shareholders exert influence over corporations is by introducing proposals that appear on corporate proxy ballots. In 2015, shareholders were both more active and more successful in multiple efforts; the number of shareholder proposals is up, the Securities and Exchange Commission has been more lenient in allowing shareholder proposals on the ballot, a small group of shareholders dominates the shareholder-proposal process, a plurality of shareholder proposals involve corporate-governance issues, and the percentage of shareholder proposals receiving majority shareholder support is up. Public-pension fund shareholder-proposal activism is associated with lower stock returns. Social-issue-focused shareholder-proposal activism helps explain a negative share-value effect associated with public-pension fund ownership. Shareholder votes supporting 2015 proxy-access proposals are associated with a negative stockprice reaction. Therefore, states and municipalities should consider how their public-employee pension funds should engage in future shareholder-proposal activism, if at all.

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