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Electing Directors By

By Jie Cai, Jacqueline L. Garner, Ralph A. Walkling, Billy Hsu, Esra Karahan, Anastasios Kritikos, Adi Mordel, David Pedersen, Anh Tran and Dazhi Zheng


Our research provides an empirical analysis of the distribution and impact of votes in uncontested director elections. Using a large sample of director elections, we find that shareholder votes are significantly related to firm performance, governance, director performance, and voting mechanisms. Directors attending less than 75 % of board meetings and those receiving negative ISS recommendations receive 14 % and 19 % fewer votes, respectively. Meanwhile, other variables have little economic impact on shareholder votes, and even directors and firms that are poorly performing typically receive more than 90 % of the vote. However, fewer positive votes for directors lead to reductions in ‘abnormal ’ CEO compensation levels and higher probability of CEO turnover. We also find that director votes affect a firm’s likelihood of removing poison pills and classified boards. At the same time, director votes have little impact on the election outcome, firm performance, or director reputation. These results provide important benchmarks for the current debate about reform of the election process

Topics: JEL Classifications, G34 Keywords, Board of directors, election of directors
Year: 2011
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