Abstract: This paper asks whether dissent votes in uncontested director elections have consequences for directors.We show that,contrary to popular belief based on prior studies, shareholder votes have power and result in negative consequences for directors. Directors facing dissent are more likely to depart boards, especially if they are not lead directors or chairs of important committees. Directors facing dissent who do not leave are moved to less prominent positions on boards. Finally, we find evidence that directors facing dissent face reduced opportunities in the market for directors.We also find that the effects of dissent votes go beyond those of proxy advisor recommendations.
Comment: This suggests that any amount of dissenting vote is an important signal, not necessarily the win/lose results. To me, this shows that shareholders (especially if you are voting on behalf of others) need to carefully consider how they should vote on directors even if that vote looks certain to pass.
Link to paper here:
Aggarwal, Reena and Dahiya, Sandeep and Prabhala, Nagpurnanand, The Power of Shareholder Votes: Evidence from Uncontested Director Elections (March 22, 2016). Robert H. Smith School Research Paper No. RHS 2609532; Georgetown McDonough School of Business Research Paper No. 2609532. Available at SSRN: https://ssrn.com/abstract=2609532 or http://dx.doi.org/10.2139/ssrn.2609532