Are Voting Guidelines Ruling Your Business? Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Recent legislative and regulatory choices giving shareholders more influence within the administration of U.S. listed firms has inspired corporate boards and management to engage with investors -- with unintended results. There is a substantial increase in the quantity of proxy conditions that need to be voted on by shareholders. Under SEC regulations, innumerable institutional investors have a fiduciary duty to cast a vote on every item that comes before them, resulting many to outsource their voting options to proxy advisors.The two greatest proxy advisory firms, Institutional Shareholder Services (ISS) and Glass, Lewis & Co. (Glass Lewis) control most of the proxy advisory market and have thousands of institutional clients, meaning that the corporate governance policies of these two firms affect a significant proportion of stockholder votes.

The author’s analyzed proxy voting on 264 stock option repricings for 251 individual companies and found that experienced poorer operational performance, lower stock returns as well as a greater likelihood of executive and employee turnover. This negative impact on shareholder value suggests that there is a better need to understand the function of proxy advisors' recommendations on other significant voting issues such as equity compensation plans or executive compensation, director elections. The regulatory argument on U.S. proxy advisory business is important worldwide, as the SEC's regulatory alternatives are a benchmark for other national and regional regulatory bodies.

PUBLICATION DATE: June 19, 2014 PRODUCT #: IIR119-PDF-ENG

This is just an excerpt. This case is about FINANCE & ACCOUNTING