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 :

March 19 2019
SSRN Share


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

We show that, while low-cost shareholder activism via shareholder-sponsored proposals is occasionally value-enhancing, many proposals are submitted by the same few individual investors and other sponsors without organizational capabilities to analyze a large number of firms. These proposals, if approved and subsequently implemented, appear to destroy shareholder value.

Firms whose shareholders are more likely to collect information before voting benefit from low-cost shareholder activism because these investors weed out low-quality proposals. We conclude that an informed shareholder base is crucial for firms to take advantage of low-cost shareholder activism.