The Efficacy of Shareholder Voting in Staggered and Non-Staggered Boards: The Case of Audit Committee Elections

Abstract

We examine whether shareholder votes can influence the audit committee and whether this influence is uniform across non-staggered and staggered boards. We find that through voting, shareholders can increase the efficacy of the audit committee, leading to improvements in audit committee structure, diligence, and financial reporting quality. These results hold only in firms with non-staggered boards, underscoring the need to separately examine staggered and non-staggered boards. Importantly, the non-responsiveness of staggered audit committees to shareholder disapproval presents an additional explanation for the weaker performance that is often documented for firms with staggered boards. Overall, our results support the movement to de-stagger boards.

Shareholder election of CSR committee members and its effects on CSR performance

“…Finally, we examine the effectiveness of CSR committee elections. Following previous studies on the efficacy of shareholder voting (Aggarwal et al, 2019;Cai et al, 2009;Fischer et al, 2009;Gal-Or et al, 2016), we expect that low shareholder support for the CSR committee will result in fundamental changes to the CSR committee structure and subsequent improvement in CSR performance.…”

“…board (Cai et al, 2009;Fischer et al, 2009) or specific board committees such as audit (Gal-Or et al, 2016, 2018Kachelmeier et al, 2016) or remuneration committees (Cai et al, 2009;Ertimur et al, 2012). 7 We focus on shareholder voting in the CSR committee, which, to the best of our knowledge, has not previously been investigated.…”

“…In particular, voting in director elections has become an important way for shareholders to express their views on director performance (Cai et al, 2009;Ertimur et al, 2012Ertimur et al, , 2018Gal-Or et al, 2018). Although votes in director elections are nonbinding, studies suggest that they do matter and have consequences for both directors (Aggarwal et al, 2019) and firms (Fischer et al, 2009;Gal-Or et al, 2016).…”

“…To examine firm-level voting outcomes (H3), similar to previous research (Cai et al, 2009;Gal-Or et al, 2018), we compute the average percentage of "for" votes for two distinctive groups: CSR committee members (AVG_FOR_CSR_VOTES) and non-CSR committee members (AVG_FOR_NONCSR_VOTES). In addition, we compute the difference between the average percentage of "for" votes for CSR and non-CSR committee members (DIFF_AVG_FOR_VOTES; Gal-Or et al, 2016, 2018. This measure helps to control for firm-specific endogenous factors that may influence overall shareholder voting for CSR versus non-CSR committee members (Gal-Or et al, 2016).…”

Determinants and consequences of auditor‐provided tax services: A systematic review of the international literature

“…However, the uncertainty associated with the regulatory environment around the passage of the SOX in conjunction with the subsequent ban on certain types of APTS may have driven these findings. Thus, whether such relations exist in the current environment is worthy of investigation Gal-Or et al (2016). expandMishra et al (2005) by showing that an audit committee is more likely to reduce the purchase of APTS in the year following their election to alleviate the concerns over their effectiveness when shareholders are dissatisfied with the audit committee and the auditors as expressed through low votes.…”