Voting Power and Shareholder Activism: A Study of Swedish Shareholder Meetings

Abstract

Manuscript Type: EmpiricalResearch Question/Issue: This paper analyses the impact of voting power on shareholder activism using unique data on activism at Swedish shareholder meetings. We hypothesize that there is a positive relationship between shareholder activism and a measure of the largest shareholder's sensitivity to increased participation by small shareholders. Research Findings/Insights: We find that firms' amenability to small shareholder influence leads to more proposals by the nomination committee, but fewer proposals by other shareholders and fewer proposals voted against. We interpret this as evidence that the shareholder elected nomination committees effectively channel shareholder concerns and preempt other kinds of activism. In addition, we find more shareholder activity in large firms and less activity in leveraged firms. Theoretical/Academic Implications: This paper offers a new voting power approach to the study of shareholder activism. We show the empirical implications of this approach, but also the importance of local institutions such as nomination committees in shaping the nature of shareholder activism.c org_811 329..343 Practitioner/Policy Implications: Politicians and companies that desire active shareholders could improve the amenability of firms to shareholder influence by ownership transparency, shareholder committees, contacts with shareholder associations and other vehicles for collective action.

Institutional proxy voting in South Africa: Process, outcomes and impact

“…Clark and Hebb (2004) highlighted a home bias in private negotiations, showing that UK firms were more likely to be targeted by UK shareholder activists than were foreign firms. In contrast, Poulsen et al (2010) noted that the prevalence of shareholder activism was higher in Swedish companies with more foreign ownership. Rehbein, Waddock and Graves (2006) reported that shareholder activists in the US targeted companies producing controversial products (such as tobacco) and those with poor environmental practices.…”

“…Shareholder activism is generally seen as a long-term process (European SRI Study 2014;, that is primarily undertaken by large institutional investors (Hadani, Goranova & Khan, 2011;Poulsen, Strand, & Thomsen, 2010;Sjöstrom, 1 The financial assistance of the National Research Foundation (NRF) towards this research is hereby acknowledged. Opinions expressed and conclusions arrived at, are those of the authors and are not necessarily attributed to the NRF.…”

“…Several authors determined that large companies are mostly targeted (via the proxy voting process) due to their visibility (Nordén & Strand, 2011;Poulsen et al, 2010) as are those that reported poor financial results in previous periods (Lantz, Montandrau & Sahut, 2010;Ng, Wang & Zaiats, 2009;Karpoff et al, 1996).…”

The relative importance of ethics, environmental, social and governance criteria

“…Empirical evidence suggests that institutional investors globally are beginning to recognise the power they have to influence corporate decision-making (Vanderkerckhove et al, 2007;Becht et al, 2010;Poulsen et al, 2010). The situation is, however, very different in South Africa (Viviers et al, 2009:1;Winfield, 2011).…”

Private engagement by Nordic institutional investors on environmental, social, and governance risks in global companies

“…The Nordic countries feature a stakeholder-oriented governance model (Poulsen, Strand, & Thomsen, 2010;Thomsen & Conyon, 2012), which can shape the collaborative engagement tactic used by institutional investors and the agent who acts according to their preferences (Dyck, Lins, Roth, & Wagner, 2019;Hart & Zingales, 2017;Yamahaki & Frynas, 2016). Liang and Renneboog (2017) report that Nordic companies have the highest ESG ratings in a global perspective to make stakeholder demands on ESG performance high on the agenda in Nordic countries.…”