Corporate Governance

Firm Value Improved by Shareholder Access to Proxy Vote

By Marie L. Oliver

A recent working paper published by Harvard Business School researchers presents evidence supporting regulatory efforts to increase shareholder power by providing proxy access to board elections.  The results suggest that the financial market puts a positive value on the election of shareholder-sponsored board members. 

The researchers studied the share prices of companies after the Securities Exchange Commission suspended its recently-passed ?shareholder proxy access rule,? which would have made it easier for investors to nominate directors. 

Specifically, they found that the greater the stake of activist investors in a company, the more negatively the share price was impacted by news of the rule suspension.  In other words, the companies that would have been the most affected by the new rule suffered the largest drop in value.

One researcher explained that ?[t]he biggest conclusion we draw from this is that allowing owners to have more power and influence with corporate decision-making, on balance, seems to be valuable in the eyes of the stock market.?

Full post as published by PomTalk on January 25, 2011 (boomark / email).