Shareholder Proposals and Corporate Governance

Abstract

Shareholder-sponsored proposals are studied focusing on those seeking changes in corporate governance and the incentive structure of managers. The sample contains 334 proposals made by shareholders of 485 of the S&P 500 firms between July 1, 1991 and June 30, 1992. We test hypotheses on the determinants of the likelihood of a corporate governance proposal being made as well as the votes obtained. We find that the likelihood of a firm being the target of one or more corporate governance proposals to be significantly affected by firm size, presence of negative net income, percentage of outside directors with outside directorships in other S&P 500 firms, the percentage of institutional ownership and whether or not shareholders vote on the choice of auditor and last year's vote. We also examine the determinants of the likelihood of specific types of proposals and of particular proponents.