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What I Like About You: A Multilevel Study of Shareholder Discontent with Director Monitoring

Author

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  • Amy J. Hillman

    (W. P. Carey School of Business, Arizona State University, Tempe, Arizona 85287)

  • Christine Shropshire

    (Department of Management, Terry College of Business, University of Georgia, Athens, Georgia 30602)

  • S. Trevis Certo

    (W. P. Carey School of Business, Arizona State University, Tempe, Arizona 85287)

  • Dan R. Dalton

    (Kelley School of Business, Indiana University, Bloomington, Indiana 47405)

  • Catherine M. Dalton

    (Kelley School of Business, Indiana University, Bloomington, Indiana 47405)

Abstract

Each year shareholders, via exercise of their proxy votes, have the opportunity to voice their support or displeasure with firms and director nominees. Examining over 2,000 Fortune 500 director nominees, we explore those indicators available to shareholders at the time of directors' (re)election to provide insight into shareholder discontent with director monitoring. By studying actual voting behaviors, we provide new perspective to understanding director elections as a governance process. Employing a multilevel approach, we find support for agency-theoretic relationships between several firm and director characteristics and shareholder opposition to directors seeking (re)election to the board. At the firm level, we find that CEO compensation level and board size are positively related to the withholding of shareholder votes in director elections, a behavior indicative of shareholder discontent. Complementing these findings, at the director level, we find that affiliated director status, tenure, and number of outside directorships are positively related, and director block ownership is negatively related to shareholder discontent with director monitoring.

Suggested Citation

  • Amy J. Hillman & Christine Shropshire & S. Trevis Certo & Dan R. Dalton & Catherine M. Dalton, 2011. "What I Like About You: A Multilevel Study of Shareholder Discontent with Director Monitoring," Organization Science, INFORMS, vol. 22(3), pages 675-687, June.
    • Handle: RePEc:inm:ororsc:v:22:y:2011:i:3:p:675-687
    DOI: 10.1287/orsc.1100.0542
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    References listed on IDEAS

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    2. Le, Quyen & Vafaei, Alireza & Ahmed, Kamran & Kutubi, Shawgat, 2022. "Independent directors' reputation incentives and firm performance – an Australian perspective," Pacific-Basin Finance Journal, Elsevier, vol. 72(C).
    3. Pucheta-Martínez, María Consuelo, 2015. "El papel del Consejo de Administración en la creación de valor en la empresa," Revista de Contabilidad - Spanish Accounting Review, Elsevier, vol. 18(2), pages 148-161.
    4. Natalie Elms & Pamela Fae Kent, 2023. "Nomination committees in Australia, outcomes for influence of a powerful CEO and diversity," Journal of Accounting Literature, Emerald Group Publishing Limited, vol. 46(4), pages 481-509, July.
    5. López-Cabarcos, M. Ángeles & Vizcaíno-González, Marcos & López-Pérez, M. Luisa, 2023. "Gender diversity on boards: Determinants that underlie the proposals for female directors," Technological Forecasting and Social Change, Elsevier, vol. 190(C).
    6. Bugeja, Martin & da Silva Rosa, Raymond & Shan, Yaowen & Yermack, David, 2024. "Show me your hand: An examination of voting methods at annual general meetings," Pacific-Basin Finance Journal, Elsevier, vol. 88(C).
    7. Bennouri, Moez & Chtioui, Tawhid & Nagati, Haithem & Nekhili, Mehdi, 2018. "Female board directorship and firm performance: What really matters?," Journal of Banking & Finance, Elsevier, vol. 88(C), pages 267-291.
    8. Wei, Feng & Ding, Binyan, 2025. "The multilevel determinants of overlapping membership on board committees: Evidence from Chinese banks," Research in International Business and Finance, Elsevier, vol. 73(PA).
    9. Stein, Guido & Gallego, Manuel, 2012. "Los consejeros dominicales y la rotación del primer ejecutivo. Evidencias de las empresas cotizadas españolas 2007-2010," IESE Research Papers D/1053, IESE Business School.
    10. Jin, Chenfei & Monfort, Abel & Chen, Feng & Xia, Neng & Wu, Bao, 2024. "Institutional investor ESG activism and corporate green innovation against climate change: Exploring differences between digital and non-digital firms," Technological Forecasting and Social Change, Elsevier, vol. 200(C).
    11. Reguera-Alvarado, Nuria & Bravo, Francisco, 2017. "The effect of independent directors’ characteristics on firm performance: Tenure and multiple directorships," Research in International Business and Finance, Elsevier, vol. 41(C), pages 590-599.

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