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Cumulative voting and the conflicts between board and minority shareholders


  • Aiwu Zhao
  • Alexander J. Brehm


Purpose - The purpose of this paper is to investigate whether cumulative voting can help ease the conflicts between board of directors and minority shareholders. Design/methodology/approach - The authors use voting result of shareholder proposals as an indicator of the level of conflicts between board and minority shareholders. OLS regression and non-parametric Kruskal-Wallis tests have been applied in the analysis. Findings - It was found that cumulative voting can help ease the conflicts between board of directors and minority shareholders. Also, the tension between board and minority shareholders is affected by both corporate governance factors and a company's stock performance. Research limitations/implications - In general, the research result indicates that cumulative voting is still an effective mechanism that can lower investors' costs on monitoring boards of directors. Practical implications - Considering the huge amount of resources used in shareholder campaigns, the research result indicates that cumulative voting can be an efficient choice to alleviate the confrontation between dissenting shareholders and board of directors. Social implications - With the change of minority shareholder structure, it is necessary to examine whether the corporate world needs to reconsider the adoption of cumulative voting. Originality/value - The authors use a novel proxy, voting results of investor proposals, to measure the conflicts between board of directors and minority shareholders. This is also one of the few papers focusing on the monitoring cost side of the agency cost problem in corporate governance literature.

Suggested Citation

  • Aiwu Zhao & Alexander J. Brehm, 2011. "Cumulative voting and the conflicts between board and minority shareholders," Managerial Finance, Emerald Group Publishing, vol. 37(5), pages 465-473, April.
  • Handle: RePEc:eme:mfipps:v:37:y:2011:i:5:p:465-473

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    References listed on IDEAS

    1. Dodd, Peter & Warner, Jerold B., 1983. "On corporate governance : A study of proxy contests," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 401-438, April.
    2. Bhagat, Sanjai & Brickley, James A, 1984. "Cumulative Voting: The Value of Minority Shareholder Voting Rights," Journal of Law and Economics, University of Chicago Press, vol. 27(2), pages 339-365, October.
    3. Stuart L. Gillan & Laura T. Starks, 2007. "The Evolution of Shareholder Activism in the United States," Journal of Applied Corporate Finance, Morgan Stanley, vol. 19(1), pages 55-73.
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    Cited by:

    1. Karpov, A., 2012. "Corporate Board Elections and Company's Performance," Journal of the New Economic Association, New Economic Association, vol. 16(4), pages 10-25.


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