What Are the Shareholder Value Implications of SEC-Challenged Shareholder Proposals?
69 Pages Posted: 30 Dec 2018 Last revised: 3 Nov 2023
Date Written: November 2, 2023
Abstract
The Securities and Exchange Commission (SEC) permits managers to request the exclusion of shareholder-initiated proposals. I construct a novel dataset of excluded and withdrawn proposals from the SEC's responses to managers' requests. An examination of announcement returns to withdrawal and exclusion decisions demonstrates that SEC-challenged proposals are value-destroying. I find that special interest investors pursuing self-serving agendas and retail investors advocating for one-size-fits-all reforms explain the value-destroying nature of SEC-challenged proposals. On average, the SEC challenge benefits firm value by filtering out these harmful proposals. However, a regression discontinuity design reveals that proposals the SEC refuses to exclude may receive majority shareholder support and destroy firm value.
Keywords: Corporate governance, corporate social responsibility, shareholder proposals, shareholder empowerment, SEC
JEL Classification: G23, G32, G34
Suggested Citation: Suggested Citation