The Changing Landscape of Corporate Governance Disclosure: Impact on Shareholder Voting

The Changing Landscape of Corporate Governance Disclosure: Impact on Shareholder Voting

David Becher, Michelle Lowry, Jared Wilson

Series number :

Serial Number: 
915/2023

Date posted :

May 04 2023

Last revised :

September 08 2023
SSRN Share

Keywords

  • Shareholder voting • 
  • boards of directors • 
  • skills matrices • 
  • corporate governance disclosure

Many mutual funds satisfy their fiduciary duty to vote on portfolio firms’ directors by following the recommendations of proxy advisory service companies such as ISS. However, companies complain that ISS recommendations are misguided. A rational response to such frictions would be for firms to decrease investors’ costs of evaluating directors’ expertise.

Consistent with this conjecture, we find that firms increasingly disclose directors’ expertise in image-based formats.These disclosures lead to less reliance on ISS, particularly in cases where ISS’s recommendations tend to be less precise. An analysis of the channels underlying the higher voting support reveals both the upside and downside of these image-based disclosures: on average these disclosures are informative, but they also facilitate window dressing.

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Authors

Professor
Real name:
David Becher
Drexel University, LeBow College of Business
Professor
Real name:
Jared Wilson
Indiana University, Kelley School of Business