Logo image
Back
A paper tiger? An empirical analysis of majority voting
Journal article   Peer reviewed

A paper tiger? An empirical analysis of majority voting

Jay Cai, Jacqueline L. Garner and Ralph A. Walkling
Journal of corporate finance (Amsterdam, Netherlands), v 21(1), pp 119-135
Jun 2013
DOI: https://doi.org/10.1016/j.jcorpfin.2013.01.002

Abstract

Election of directors Majority voting Shareholder proposals
Majority voting in board elections has emerged as a dominant theme in recent proxy seasons. Analysis of majority voting is important: first, the impact is controversial yet scant empirical evidence exists. Second, Congress is still considering mandating this practice. Third, there has been a tectonic shift in adoptions of majority voting, from 16% to over 67% of S&P 500 firms in just two years. Fourth, the vast majority of shareholder proposals for majority voting are sponsored by unions with little shareholdings. Proponents argue that majority voting aligns shareholder–director interests. Opponents argue that the practice will be disruptive and could result in the failure of boards to meet exchange and SEC requirements. Others assert that majority voting is a paper tiger, amounting to form over substance, particularly since many adoptions are non-binding. We provide an empirical analysis of the wealth effects, characteristics, and efficacy of majority voting. Our results are consistent with the paper tiger hypothesis. ► Majority voting represents a tectonic shift in shareholder election of directors. ► Over 50% of S&P 500 firms have switched to majority voting in the past 5years. ► Congress has considered mandating it. ► We empirically analyze its wealth effects, characteristics, and efficacy. ► Our results, however, suggest that majority voting has little efficacy.

Metrics

13 Record Views
34 citations in Web of Science
33 citations in Scopus

Details

InCites Highlights

Data related to this publication, from InCites Benchmarking & Analytics tool:

Collaboration types
Domestic collaboration
Web of Science research areas
Business, Finance
Logo image