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Electing Directors


  • JIE CAI,



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    • All authors can be reached at the LeBow College of Business, Drexel University, Philadelphia. The authors appreciate comments from David Becher, Jennifer Bethel, Kenneth Borokhovich, Ann Bradenton, Naveen Daniel, Diane Del Guercio, Ming Dong, Daniel Dorn, Eliezer Fich, Stuart Gillan, Kathleen Kahle, Felix Meschke, Frederik Schlingemann, Anil Shivdasani, Randall Thomas, David Yermack, and seminar participants at Drexel University and the 2007 Western Finance Association meetings. We thank Brian Bushee for sharing his classification system for type of institutional ownership. We thank Cornerstone Research and Stanford Law School for providing us with data on litigation. This paper expresses the views of the authors and does not represent in any way the views of Cornerstone Research or Stanford Law School. We also appreciate research assistance from Ezgi Hallioglu, Billy Hsu, Esra Karahan, Anastasios Kritikos, Adi Mordel, David Pedersen, Anh Tran, Tamika Washington, and Dazhi Zheng. We thank the LeBow College of Business Center for Corporate Governance for financial support.


Using a large sample of director elections, we document that shareholder votes are significantly related to firm performance, governance, director performance, and voting mechanisms. However, most variables, except meeting attendance and ISS recommendations, have little economic impact on shareholder votes—even poorly performing directors and firms typically receive over 90% of votes cast. Nevertheless, fewer votes lead to lower “abnormal” CEO compensation and a higher probability of removing poison pills, classified boards, and CEOs. Meanwhile, director votes have little impact on election outcomes, firm performance, or director reputation. These results provide important benchmarks for the current debate on election reforms.