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Article
Publication date: 10 February 2018

Jörn Obermann and Patrick Velte

This systematic literature review analyses the determinants and consequences of executive compensation-related shareholder activism and say-on-pay (SOP) votes. The review covers…

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Abstract

This systematic literature review analyses the determinants and consequences of executive compensation-related shareholder activism and say-on-pay (SOP) votes. The review covers 71 empirical articles published between January 1995 and September 2017. The studies are reviewed within an empirical research framework that separates the reasons for shareholder activism and SOP voting dissent as input factor on the one hand and the consequences of shareholder pressure as output factor on the other. This procedure identifies the five most important groups of factors in the literature: the level and structure of executive compensation, firm characteristics, corporate governance mechanisms, shareholder structure and stakeholders. Of these, executive compensation and firm characteristics are the most frequently examined. Further examination reveals that the key assumptions of neoclassical principal agent theory for both managers and shareholders are not always consistent with recent empirical evidence. First, behavioral aspects (such as the perception of fairness) influence compensation activism and SOP votes. Second, non-financial interests significantly moderate shareholder activism. Insofar, we recommend integrating behavioral and non-financial aspects into the existing research. The implications are analyzed, and new directions for further research are discussed by proposing 19 different research questions.

Details

Journal of Accounting Literature, vol. 40 no. 1
Type: Research Article
ISSN: 0737-4607

Keywords

Article
Publication date: 27 October 2017

S. Subramanian

This paper aims to explore the voting recommendations made by proxy advisory firms in India by descriptively analyzing the “Vote Against” recommendations made by two proxy…

Abstract

Purpose

This paper aims to explore the voting recommendations made by proxy advisory firms in India by descriptively analyzing the “Vote Against” recommendations made by two proxy advisory firms for shareholder resolutions for the listed Indian firms. It also empirically tests the relationship between proportion of “Vote Against” recommendations and the parameters which are proved to be influencing corporate governance practices of a firm.

Design/methodology/approach

Empirical analysis of proxy voting recommendations for a sample of 77 listed non-financial Indian firms across four financial years.

Findings

The paper finds that two categories of shareholders proposals, “reappointment of non-executive directors” and “remuneration of statutory auditors”, account for 83.5 per cent of “Vote Against” recommendations. Further, there are significant differences in the proportion of “Vote Against” recommendations based on the type of “controlling ownership” of the firms. The regression analysis indicates that the relationships between proportion of “Vote Against” recommendations and determinants of corporate governance practices are mostly in line with the a priori expectations, as far as ownership is concerned but requires further analysis for other parameters.

Research limitations/implications

Exploratory nature of this paper opens up new research issues in the upcoming Indian Proxy advisory industry. It suggests that the future research should consider the controlling ownership as an important parameter while analyzing the proxy firm recommendations.

Practical implications

Indian proxy advisory industry requires lots of nurturing from the regulators, and this exploratory study provides the basic insights in this regard. It also highlights potential corporate governance issues where the regulators need to tighten the corporate governance norms, like reappointment of independent directors and appointment of statutory auditors.

Originality/value

Pioneering Study in understanding the proxy advisory voting recommendations in an emerging market.

Details

Journal of Indian Business Research, vol. 9 no. 4
Type: Research Article
ISSN: 1755-4195

Keywords

Article
Publication date: 13 July 2015

Chrispas Nyombi

– The purpose of this paper is to determine whether the Board Neutrality Rule and the primacy afforded to shareholders during takeovers is justified under common law and policy.

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Abstract

Purpose

The purpose of this paper is to determine whether the Board Neutrality Rule and the primacy afforded to shareholders during takeovers is justified under common law and policy.

Design/methodology/approach

The paper provides a detailed assessment of the role play by the board neutrality rule and whether this is supported by takeover law and Company law. A review of case law and statutes is provided. The paper is largely analytical.

Findings

The paper finds little justification for the continued imposition of the Board Neutrality Rule.

Originality/value

The paper adds to the growing body of research literature which has analysed the role played by the Board Neutrality Rule during takeovers.

Details

International Journal of Law and Management, vol. 57 no. 4
Type: Research Article
ISSN: 1754-243X

Keywords

Article
Publication date: 7 September 2020

J. Samuel Baixauli-Soler, Gabriel Lozano-Reina and Gregorio Sánchez-Marín

The purpose of this paper is to analyze the influence of managerial discretion on the effectiveness of say on pay (SOP) as a governance mechanism. This goal covers an important…

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Abstract

Purpose

The purpose of this paper is to analyze the influence of managerial discretion on the effectiveness of say on pay (SOP) as a governance mechanism. This goal covers an important gap since the issue of how effective SOP is in promoting more aligned compensation has proved somewhat controversial.

Design/methodology/approach

This empirical research opted for a panel methodology for the period 2003–2017, using a sample of large UK listed-companies (specifically, 3,445 firm-year observations). Data were obtained from several sources (Manifest Ltd, BoardEx, Worldscope, Factset Ownership and DataStream).

Findings

Results show that managerial discretion plays an important role in the effectiveness of SOP as a mechanism for increasing aligned CEO compensation. While individual discretion (latitude of objectives) exerts a negative effect, contextual discretion (latitude of action) increases SOP effectiveness. The global effect of managerial discretion is positive when there is high level of both individual and contextual discretion.

Originality/value

This empirical study provides evidence concerning an emerging topic in the literature regarding the impact of SOP as a shareholder activism mechanism of corporate governance on executive compensation. By taking managerial discretion into consideration as a relevant moderating factor, it also offers a better explanation of SOP effectiveness as a governance mechanism.

Details

Management Decision, vol. 59 no. 6
Type: Research Article
ISSN: 0025-1747

Keywords

Article
Publication date: 13 April 2012

Jun Yang, Eric Zengxiang Wang and Yunbi An

The purpose of this paper is to study filer identities and voting outcomes of Canadian shareholder proposals and their impact on shareholders' wealth during the period from 2001…

Abstract

Purpose

The purpose of this paper is to study filer identities and voting outcomes of Canadian shareholder proposals and their impact on shareholders' wealth during the period from 2001 to 2008.

Design/methodology/approach

In total, 762 Canadian shareholder proposals and related information on targeted firms were collected from the Shareholder Association for Research and Education (SHARE) and the System for Electronic Document Analysis and Retrieval (SEDAR) databases. Statistical analyses are carried out on the features of shareholder proposals. Regression analyses are performed on voting outcomes, and an event study is conducted to test the impact of shareholder proposals on stock prices.

Findings

The authors' analyses show that proposals submitted by institutions or coordinated shareholder groups receive stronger support than those submitted by individuals and religious groups. Targeted firms are more willing and more likely to reach agreements with institutional investors, which in turn prompts activists to withdraw their proposals. The voting behavior of the Ontario Teachers' Pension Plan (OTPP) has a significant impact on voting outcomes. The targeted firms' stock prices respond substantially to news on proposals submitted by institutional and coordinated investors and proposals on social and environmental issues.

Originality/value

In addition to in‐depth analyses (issues, filers, voting outcomes, and impacts on stock price) of Canadian shareholder proposals, this paper explores the voting behaviour and impact of a large institutional shareholder that has been passive in filing shareholder proposals. Special attention is paid to Canadian features of shareholder activism, and differences between Canadian and US shareholder proposals are highlighted and discussed. The paper thus extends shareholder activism studies from focusing on open shareholder activists to investigating passive institutional shareholders.

Details

Managerial Finance, vol. 38 no. 5
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 23 January 2007

Luc Renneboog and Grzegorz Trojanowski

This paper seeks to examine whether or not divident policy is influenced by the firm's corporate control structure, investigating the relationship between the dynamics of earnings…

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Abstract

Purpose

This paper seeks to examine whether or not divident policy is influenced by the firm's corporate control structure, investigating the relationship between the dynamics of earnings payout and the voting power enjoyed by different types of shareholders. This allows one to test a set of hypotheses derived from agency and pecking order theories.

Design/methodology/approach

A large panel of UK firms for the 1990s and is analyzed that the payout policy is significantly related to control concentration. The problem of control measurement is addressed and the use of Banzhaf indices advocated as a relevant measure of voting power in the analysis of corporate policy choices. The traditional framework proposed by Linter is extended and an econometrically sound approach to modeling the dynamics of the total payout suggested. Where most – even recent – studies on payout policy show some methodological flaws, state‐of‐the‐art dynamic panel data estimation procedures are applied.

Findings

Expectedly, profitability is a crucial determinant of payout decisions, but the presence of strong block holders or block holder coalitions weakens the relationship between the corporate earnings and the payout dynamics. Block holders appear to realize that an overly generous payout may render the company liquidity constrained, and, consequently, result in suboptimal investment policy.

Practical implications

The results challenge some of the implications of the agency theories of payout, and favor a pecking‐order explanation for the observed patterns. The analysis of payout dynamics reveals also that companies adjust payout policies to changes in earnings only gradually, which is consistent with “dividend smoothing”. In fact, the results suggest a presence of a more general phenomenon of the “total payout smoothing”.

Originality/value

According to one's bet knowledge, this is the first study employing those game theory‐based concepts in the context of corporate payout policies.

Details

Managerial Finance, vol. 33 no. 1
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 1 June 1975

Richard Dobbins and Thomas W. McRae

This monograph reports the growth in ownership of ordinary shares in UK registered and managed companies by institutional shareholders and assesses the implications for corporate…

Abstract

This monograph reports the growth in ownership of ordinary shares in UK registered and managed companies by institutional shareholders and assesses the implications for corporate management. Combined holdings of insurance companies, pension funds, investment trust companies, and unit trusts amounted to 45 per cent of quoted UK equities in 1974 and will approach 50 per cent by 1977. Despite exhortations from the Bank of England, the Press, academics and private shareholders, institutions have been reluctant to use their voting strength. French and German companies are familiar with managerial participation by financial institutions. In the United Kingdom the persistent increase in institutional shareholdings presents management with opportunities to mobilise institutional support for the board, particularly in takeover situations; to involve financial institutions in corporate planning and the development of industrial democracy; to use institutions as a source of funds; and to use the financial resources of institutions to maximise the market capitalisation of the firm.

Details

Management Decision, vol. 13 no. 6
Type: Research Article
ISSN: 0025-1747

Article
Publication date: 3 August 2015

Maggie Foley, Richard Cebula, Chulhee Jun and Robert Boylan

– This study aims to analyze withdrawn shareholder proposals to gain insight into the role of shareholder proposals in the governance of public corporations.

Abstract

Purpose

This study aims to analyze withdrawn shareholder proposals to gain insight into the role of shareholder proposals in the governance of public corporations.

Design/methodology/approach

A cursory look at the data suggests that unions are the most likely group to withdraw proposals. The authors focus on the behavior of unions and find that unions often resubmit a shareholder proposal which had garnered significant support in the previous year, only to withdraw the proposal in the second year.

Findings

The contention is that the proposals were withdrawn in Year 2 because the issue was settled in a manner agreeable to the union. Furthermore, this research suggests that unions are more likely to withdraw proposals when the prior years’ appeal is higher, when firms have a record of poor performance, lower insider ownership or relatively independent boards. This phenomenon suggests that unions submit and withdraw shareholder proposals strategically. The authors contend that unions use shareholder proposals and the withdrawal of proposals to improve conditions for union workers at the expense of shareholder value.

Practical implications

This study suggests that unions submit and withdraw shareholder proposals strategically. The authors contend that unions use shareholder proposals and the withdrawal of proposals to improve conditions for union workers at the expense of shareholder value.

Details

Corporate Governance, vol. 15 no. 4
Type: Research Article
ISSN: 1472-0701

Keywords

Article
Publication date: 12 January 2023

Suzette Viviers and Lee-Ann Steenkamp

Given the urgency to address the climate change crisis, the purpose of this study was to investigate the impact of 12 macro-level antecedents on energy and environmental (E&E…

Abstract

Purpose

Given the urgency to address the climate change crisis, the purpose of this study was to investigate the impact of 12 macro-level antecedents on energy and environmental (E&E) shareholder activism in 12 developed countries. Focus was placed on shareholder-initiated E&E resolutions.

Design/methodology/approach

Panel regressions were used to evaluate the relationships between the macro-level antecedents and two dependent variables, namely, the number of shareholder-initiated E&E resolutions filed and voting support for these resolutions.

Findings

The number of shareholder-initiated E&E resolutions filed increased slightly over the research period (2010–2019) but received very little voting support on average. Most of the 1,116 considered resolutions centred on the adoption or amendment of nuclear and environmental policies. Several resolutions called for improved E&E reporting. A significant relationship was found between the number of shareholder-initiated E&E resolutions filed and the rule of law.

Research limitations/implications

The empirical evidence confirmed limited voting support for shareholder-initiated E&E resolutions and the importance of the rule of law in advancing the E&E social movement.

Practical implications

As the E&E social movement is gaining momentum, listed companies in the considered countries are likely to experience more pressure from shareholder activists.

Social implications

To achieve participatory and inclusive climate governance, shareholder activists should collaborate more closely with other challengers in the E&E social movement, notably policy makers and those promoting the rule of law.

Originality/value

The authors considered macro-level antecedents of E&E shareholder activism that have received scant attention in earlier studies. Social movement theory was used as a novel theoretical lens.

Details

Sustainability Accounting, Management and Policy Journal, vol. 14 no. 5
Type: Research Article
ISSN: 2040-8021

Keywords

Article
Publication date: 22 February 2013

Kuntara Pukthuanthong, Thomas J. Walker, Dolruedee Nuttanontra Thiengtham and Heng Du

– The purpose of this paper is to examine whether and how family ownership enhances or damages firm value.

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Abstract

Purpose

The purpose of this paper is to examine whether and how family ownership enhances or damages firm value.

Design/methodology/approach

The paper studies a sample of Canadian companies listed on the Toronto Stock Exchange (TSX) between 1999 and 2007 and apply multivariate regression with firm value as a dependent variable. The paper measures firm value as Tobin ' s Q and ROA based either on net income or EBITDA. The independent variables include family firm dummy and ownership percentage.

Findings

It is found that control-enhancing mechanisms which are often employed by family companies add value to companies. Furthermore, it is found that agency conflicts between ownership and management are less costly than those between majority and minority shareholders, suggesting that family ownership helps resolve the agency conflicts between ownership and management and in turn enhances firm value. Finally, it is found that family companies with founders as CEOs outperform those with descendants as CEOs.

Research limitations/implications

The paper studies Canadian family firms; as such, the sample size is not relatively large. Nonetheless, the results should be generalized as Canada is one of the largest markets in the world and have high integration with the rest of the world.

Practical implications

The results suggest investors should invest in family ownership firms.

Originality/value

The paper shows whether firm ownership increases firm value and the determinant of family firm value.

Details

International Journal of Managerial Finance, vol. 9 no. 1
Type: Research Article
ISSN: 1743-9132

Keywords

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