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Gadflies at the Gate: Why Do Individual Investors Sponsor Shareholder Resolutions?

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Document pages: 16 pages

Abstract: Individual investors are active participants in the shareholder resolution process, filing approximately one quarter of the total number of shareholder resolutions voted on each year. Their activism, however, is controversial. Critics contend that the large number of resolutions filed each year waste corporate resources and shareholder attention. Defenders respond that every shareholder is a legitimate participant in corporate governance and that shareholder resolutions are an important means of exercising voting and economic rights to improve corporate outcomes. In this Closer Look, we examine the topic of individual shareholder activism in detail. We ask: •Are individual activists harbingers of important new ideas or a strain on corporate resources? •To what extent should shareholders actively participate in corporate policy? To what extent should they defer to the judgment of directors? •How much “shareholder democracy” is the right amount? •Should SEC rules governing shareholder resolutions be adjusted? The Stanford Closer Look series is a collection of short case studies through which we explore topics, issues, and controversies in corporate governance and executive leadership. In each study, we take a targeted look at a specific issue that is relevant to the current debate on governance and explain why it is so important. Larcker and Tayan are co-authors of the books Corporate Governance Matters and A Real Look at Real World Corporate Governance.

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