2007b, Democracy or Disruption: An empirical analysis of majority elections, Drexel University working paper

In the most recent proxy seasons, the majority election of board members has emerged as a major corporate governance initiative. Proponents suggest that majority elections are more democratic than the current plurality voting system, allowing greater shareholder power. Opponents believe that the costs of failed elections as well as other unfavorable outcomes outweigh the benefits of the process. In addition, recent academic evidence on the level of voting for directors suggests that almost all directors currently receive a majority of votes anyway. We examine the impact of financial and other governance characteristics on both the probability that a firm receives a majority election proposal and on the probability of adoption. Our evidence suggests that firms with large pension obligations and poorly performing firms are more likely to receive majority proposals. These firms as well as those with higher outside board representation and fewer shareholder rights are more likely to adopt the proposals. We also examine abnormal returns surrounding proposals and adoptions. Firms announcing proposals earn significantly positive abnormal returns. Although firms adopting majority voting on average earn insignificant return, the returns are significantly lower for more binding majority provisions