Governance consequences of shareholder dissent in director elections: Evidence from a purely majority voting system

This study examines the consequences of shareholder dissent in director elections using Australian data, where firms uniformly adopt majority voting. The results indicate that higher shareholder dissent sends a clear signal of shareholder dissatisfaction and leads to multiple governance changes including director, board, and CEO turnover. We also document that there is differential accountability of directors, with female directors and chairs of the remuneration and nomination committees having a greater likelihood of being replaced following higher dissent, including dissent directed at other candidates. Importantly, we find that abstain votes, which are commonly used in US studies under plurality voting, do not exhibit the same effect, highlighting that against and abstain votes convey distinct signals. By providing the first evidence from a pure majority voting regime, our study overcomes measurement limitations in prior US based research and offers new insights for jurisdictions that allow plurality voting in director elections, such as the US and Canada. The results are also relevant to countries such as the UK that use majority voting and have imposed or are considering mandating that firms which receive high dissent outline responses to shareholders.