Closer Look Series: Proxy Access: A Sheep, or Wolf in Sheep’s Clothing?

Closer Look Series: Topics, Issues and Controversies in Corporate Governance, No. CGRP-06, Professor David F. Larcker and Brian Tayan, MBA ’03, Date: 7-8-2010

• Proxy Access: A Sheep, or Wolf in Sheep’s Clothing? (PDF)

At most companies, the board of directors has sole authority to nominate candidates for election to the board. In recent years, some governance experts have advocated rules lessening these restrictions and allowing shareholders greater access to nominate candidates.

Supporters of proxy access argue that, because directors are the representatives of shareholders, shareholders should have the right to nominate individuals to serve on their behalf. Opponents argue that shareholders lack firm-specific knowledge about the qualifications necessary to fill a board vacancy, and that proxy access will open the board to “special interests.”

We examine the issue. What impact will proxy access have on director elections? Will it improve or impair governance quality?

Related Research:
The Market Reaction to Corporate Governance Regulation (PDF )
Working paper dated: May 3, 2010, by Prof. David F. Larcker, Prof. Dan Taylor, Wharton-Penn and doctoral student Gaizka Ormazabal .

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