One of the key benefits of an active network like the corporate governance community is that the ever increasing reading pile gets shared around. Jim McRitchie, the noted US corporate governance blogger has done all of us a timely favour with a round up of a number of key academic papers investigating the efficacy of shareholder engagement. The full article can be found here but if you are in a real hurry, here are a few of the key take aways:
Antecedents of Shareholder Activism in Target Firms: Evidence from a Multi-Country Study, by William Q. Judge, Ajai Gaur, and Maureen I. Muller-Kahle, looked at shareholder activism targeted at firms located in three common law countries (i.e., USA, UK, and Australia) and three civil law countries (Japan, Germany, and South Korea) during the 2003–07 time period.
Takeaway: Boards need to understand the motivations of shareowners and open two-way lines of communication. Expect social activism to rise with growing income inequality.
Is (Institutional) Shareholder Activism New? Evidence from UK Shareholder Coalitions in the Pre-Cadbury Era by Rafel Crespi and Luc Renneboog investigated whether or not shareholder voting coalitions disciplined managers in the pre-Cadbury era.
Takeaway: Coalitions of shareowners and pacts can bring about change at poorly performing companies.
Shareholder Voting and Directors’ Remuneration Report Legislation: Say on Pay in the UK by Martin Conyon and Graham Sadler
Takeaway: Shareholder voting appears to have limited effects on curbing excess CEO pay. Boards and compensation committees may want to communicate better policies on executive compensation to avert shareholder dissent but in general “say on pay” is much to do about nothing. Keep pay reasonably in line and boards won’t have a problem.
Voting Power and Shareholder Activism: A Study of Swedish Shareholder Meetings by Thomas Poulsen, Therese Strand, and Steen Thomsen
Takeaway: Companies that provide mechanisms for greater shareowner influence through the director nomination process transparency, contacts with shareowner associations and other vehicles for collective action are likely to face fewer proxy issues, since concerns can be addressed year around, instead of just at the AGM.
The full text of the research papers is available from “Corporate Governance: An International Review”