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We examine the perceived influence of externally generated firm ratings of corporate social responsibility (CSR) on voting for shareholder-sponsored CSR proposals. Using stakeholder and legitimacy theories, we introduce two rationales that relate shareholder voting decisions to the firm’s CSR performance: the complementary perspective where investors rely on management’s branding or image of the firm for CSR performance, and the sufficiency perspective where shareholders consider legitimacy effects of firm CSR performance. Our examination of 473 CSR shareholder-sponsored proposals during the 2013 to 2015 proxy seasons reveals a negative relationship between support for shareholder-sponsored CSR proposals and CSR strengths, particularly for social and environmental CSR strengths. We also find a positive relationship between support for shareholder-sponsored CSR proposals and CSR concerns, particular in the area of environmental CSR concerns. These results partially support the sufficiency perspective that incorporates shareholder legitimacy concerns. When companies have poor CSR performance, shareholders may view further CSR initiatives as beneficial to the firm.

This research is one of the first studies to examine the effects of CSR disclosures on a firm’s decision to purchase back their own shares of stocks. Additionally, the authors examine whether the effect of CSR disclosures is stronger than the effect of CSR performance on the decision to repurchase shares. Examining firms in the United States, the authors find that total CSR disclosures and the CSR disclosures related to the dimensions of social, environmental, and governance are significantly and positively related to the number of shares that a firm buys back. Additionally, the authors find that the effects of CSR disclosures are stronger for total and the CSR dimensions of social and governance than for CSR performance. For the environmental dimension of CSR, both disclosure and performance scores are significant. This research expands our understanding of the impact of CSR disclosure by showing the importance it plays in the decision to buy back stock and implies that firms that repurchase their stock are more socially responsive than firms that do not. Finally, it contributes to the growing literature on how CSR disclosure has a different impact than CSR performance on firm decisions and outcomes.

We examine voting outcomes on shareholder governance proposals that seek annual elections for all the directors on the corporate board. We relate these voting outcomes to different ownership structure characteristics and a series of variables that are publicly available. The pattern of support indicates that proposals are generally successful when they are supported by large activist groups and when institutions hold a significant fraction of shares outstanding. Our evidence casts some doubt on the efficacy of the Rule 14A-8 mechanism, which limits the amount of information that can be provided to shareholders as part of the proposal.

This chapter analyzes the market response to ticker symbol change of stocks with non-conventional voting structures (or multiple class shares, MCS). I find a significant drop (increase) in prices and liquidity (short-sale activity) of MCS stocks, with the most severe decrease being reported for the lower-voting class. This evidence suggests that investors revised downward the assessment of MCS stocks. Regression analysis shows that a significant part of the cross-sectional variation of the event-results is explained by firm's agency costs. Overall, the chapter stresses the importance of enhanced market transparency in curbing private benefits.

Blockholders can behave opportunistically because small shareholder voting suffers from coordination problems. In this chapter, we investigate the features of small shareholder voting using a theoretical framework. Specifically, we investigate when defeating a blockholder’s resolution is optional for shareholders. Regulatory initiatives that facilitate communication between small shareholders or focus on institutional investors and corporate governance tools that alter or add the threshold in the voting game also contribute to solving the coordination problem. These corporate governance initiatives can increase the relevance of AGMs in Europe.

In this part of the book, we investigate the practical characteristics of AGMs in an extensive empirical analysis. For this, we consider the turnout rates of AGMs of seven European Member States between 2010 and 2014 in this chapter. We show that, although there are large differences in total and small shareholder turnout rates among Member States, there is an overall increasing trend in the 2010–2014 period. In contrast to what economic theory predicts, a substantial and increasing part of small shareholders actually participate in AGMs.

From a theoretical agency perspective, the Annual General Meeting of Shareholders (‘AGM’) is an important corporate law solution for mitigating agency problems between shareholders and managers in large public corporations. At the AGM, shareholders are informed, they are offered a venue to discuss and ask questions, and they are involved in decision-making. Despite these theoretical important functions, the AGM is largely criticized in practice. Criticism contains, for example, rational apathy and free-rider behaviour that lead to low shareholder turnout, a lack of (meaningful) dialogue and side-stepping behaviour. Yet, fundamental empirical research on the AGM in practice is lacking, which makes this book highly relevant. This chapter provides the outline of the research that is conducted in this book.

We investigate the implications of the misalignment between manager and shareholder interests and the effects of initial ownership stakes and reinvestment of unpaid dividends on managerial self-dealing.

We collect and analyze data from controlled laboratory experiments with an experimental setting which captures the role of ownership in managerial considerations.

We see the emergence of both investor-aligned outcomes and managerial self-dealing outcomes. We find that increasing managers’ initial endowment of shares makes it harder for managers to coordinate on an outcome and lowers return on investment. Moreover, allowing managers to reinvest unpaid dividends results in a transfer of wealth to management.

The results and the conclusions are drawn upon data from the particular setting we investigate. Generalizing them beyond the specific setting should be done with caution.

Higher managerial ownership stake means that managers have a greater incentive to reward shareholders, but we find that it may also imply a more difficult coordination problem between managers – sometimes to the detriment of shareholders.

This study is the first to consider the direct relationship between managers’ portfolios and voting decisions regarding dividends and investment levels.