The Costs and Benefits of Shareholder Democracy

The Costs and Benefits of Shareholder Democracy

Nickolay Gantchev, Mariassunta Giannetti

Series number :

Serial Number: 

Date posted :

December 20 2018

Last revised :

July 09 2019
SSRN Share


  • shareholder activism • 
  • shareholder proposals • 
  • Shareholder voting • 
  • Corporate governance

We document for the first time the costs and benefits of individual investor activ- ism through shareholder-sponsored proposals. As the least costly form of inter- vention, shareholder proposals can benefit firms that are less likely to be targeted by hedge funds.

Yet, many proposals are submitted by the same few “corporate gadflies”, individuals without organizational capabilities to analyze a large number of firms. These proposals, if supported by a majority of the votes cast and sub- sequently implemented, appear to destroy shareholder value. Only firms whose shareholders collect information before voting benefit from low-cost shareholder activism because informed shareholders weed out low-quality proposals.