Tuesday, June 2, 2009
The real question regarding the shareholder access debate is whether once shareholders have the power to nominate minority directors whether they will use it for good or ill, or at all. Yair Listokin has a paper, “If You Give Shareholders Power, Do They Use It? An Empirical Analysis,” in which suggests the answer might be that they won’t use it at all. Listokin looked at state antitakeover protection statutes that provide shareholders with the opportunity to opt-out through the adoption of shareholder initiated bylaw proposals. He finds that very few companies’ shareholders take advantage of the opportunity to opt-out of these statutes. This finding is consistent with earlier work from Rob Daines and Michael Klausner who looked at customization of incorporation documents and found very little opting out of default provisions (here).
Recently, we started to have experience with shareholder votes relating to ‘say-on-pay’ a hot-button issue (and here) it there ever was one. So far, shareholders who have had the opportunity to vote on pay packages appear reticent to say ‘no.’ The WSJ recently canvassed 15 companies large cap companies with say-on-pay policies that permit shareholders to review executive pay policies (here) and none of questions passed. Given the high degree of emotion that pay questions can generate, the vote results (or lack of them) are pretty amazing. All of this simply provides fuel for the shareholder access debate.