Board of Directors' Responsiveness to Shareholders: Evidence from Shareholder Proposals

Using a sample of 620 non-binding, majority-vote (MV) shareholder proposals between 1997 and 2004, we analyze the frequency, determinants and consequences of boards' implementation decisions. The frequency of implementation has almost doubled after 2002, reaching more than 40%. Shareholder pressure (e.g. the voting outcome and the influence of the proponent) and the type of proposals are the main determinants of the implementation decision, while traditional governance indicators do not seem to matter. Outside directors implementing MV shareholder proposals experience a one-fifth reduction in the likelihood of losing their board seat and in the likelihood of losing other directorships.