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11 - How Does Board-Shareholder Engagement Really Work?

Evidence from a Survey of Corporate Officers and from Disclosure Data

Published online by Cambridge University Press:  31 August 2024

Luca Enriques
Affiliation:
University of Oxford
Giovanni Strampelli
Affiliation:
Università Commerciale Luigi Bocconi, Milan
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Summary

Shareholder engagement is pivotal in corporate governance, evolving beyond formal resolutions to impact business decisions. This chapter unveils the typically undisclosed dynamics of board-shareholder engagement through a survey of 171 SEC-registered corporations, targeting corporate secretaries, general counsel, and investor relations officers. The survey was complemented by a review of the disclosure on shareholder voting and engagement included in proxy statements filed by Russell 3000 companies during the 2018–2022 meeting seasons. Larger and mid-sized companies more frequently engage than smaller organizations. Engagement, often with major asset managers, can take a confrontational turn, particularly with hedge funds at smaller firms. Topics include executive incentive plans, ESG metrics, GHG emission reduction, workforce diversity, pay equity, and political spending. The study reveals that engagement significantly influences corporate practices, leading to changes, withdrawal of proposals, alterations in proxy votes, and the inclusion of engaged shareholder-nominated directors in management slates.

Type
Chapter
Information
Board-Shareholder Dialogue
Policy Debate, Legal Constraints and Best Practices
, pp. 325 - 367
Publisher: Cambridge University Press
Print publication year: 2024

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