Electing Directors

ABSTRACT 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.