‘Low-Cost’ Shareholder Activism: A Review of the Evidence

Over the last decade, a series of corporate governance scandals have given rise to an intense wave of shareholder activism. In this chapter, I focus on two particular tools of shareholder activism, namely shareholder proposals filed under Rule 14a-8 and shareholder votes on uncontested director elections. These tools share an appealing feature. Their cost is quite modest and they do not require a significant equity stake in the company — hence, they are referred to as "low-cost" tools of activism. But their easy accessibility comes at a price. Both shareholder proposals and shareholder votes on director elections are essentially non-binding on the target firm, casting doubts on their effectiveness as a driver of change.